The Beauty Care M&A markets started the year with 26 transactions in Q1’20, which was down 7% from Q1’19 and down 13% from a strong year-end in Q4’19. Similar to Q4’19, the current quarter was dominated by strategic acquirers with deals announced by Procter & Gamble, Colgate, Beiersdorf, and new entrant e.l.f. Beauty. The quarter witnessed fairly limited private equity-led M&A with deals announced by Tengram Capital Partners, Bookend Capital, and Sandbridge Capital. Unlike Q4’19, which delivered multiple deals over $750 million, Q1’20 was comprised primarily of smaller, middle-market transactions under $250 million in value.
Despite strong Beauty Care M&A activity, the quarter will be remembered as the leading edge of the COVID-19 global pandemic that has negatively impacted all of our personal and professional lives with fast, dramatic, and sometimes tragic consequences. With the stock market correction beginning in late February and the first wave of stay-at-home orders going into place on March 19, most M&A activity halted in late March amid business closures, extreme uncertainty of financial results, contraction of financing options, and the simple inability to meet in-person, which forced most M&A processes to go on hold.
While these events had a small impact on Q1’20 M&A performance, we will most certainly see a dramatic drop in Beauty Care M&A activity in Q2’20 and an ongoing impact for the remainder of the year. However, Intrepid remains optimistic that we will rebound from this on a social and economic level faster than other crises (to learn more read Pandemic Pandemonium and the Return of M&A). Furthermore, Beauty Care markets have proven to be recession-resistant. Beauty Care M&A, in particular, will benefit from a robust pre-COVID-19 deal backlog, powerful underlying fundamentals, healthy strategic acquirers, continued private equity appetite, and a long list of high-growth beauty care brands that have either not been impacted by or are a beneficiary of the social and technological changes that are being accelerated by stay-at-home orders, social distancing guidelines, and shifts in consumer shopping behavior.
Q1’20 Beauty Care M&A highlights include:
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- Deal volume was down 7% from Q1’19 and down 13% from a strong Q4’19.
- Strategic acquirers ruled the quarter with deals announced by Procter & Gamble, Colgate, Beiersdorf, and e.l.f. Beauty.
- Private equity activity was down with only a few deals in the quarter, including investments from Tengram Capital Partners, Bookend Capital, and Sandbridge Capital.
- Deal activity in the beauty care contract manufacturing and packaging sectors remained high following an active Q4’19.
- COVID-19-related events brought M&A activity to a halt in the last weeks of the quarter.
Stay tuned for more Intrepid perspectives on the impact of COVID-19 and the resulting state of the economy on the Beauty Care M&A markets in our Q2’20 M&A report.