A new report published by AT Kearny considers inorganic growth as one of the few ways to grow within the beauty and personal care industry. The past few years have been huge for mergers and acquisitions (M&As). The largest companies in the industry have been growing by adding new brands to their portfolios. There was only a 3% growth in the US market within the last 5 years. This slow growth is the reason companies are turning to inorganic growth, either acquiring or being acquired. The goal of the study was to find out if the M&As are hitting the right targets and if they are benefiting the acquirers.
Findings from the study showed that acquiring smaller brands helps the acquirers expand their customer base to new demographics without compromising the customer base of their existing brands. The smaller brands help achieve access to more consumers, especially racial minorities who often buy products that are specifically targeted to them. The study also found that M&As help acquirers reach more age groups.
AT Kearny found that M&As have helped companies innovate by acquiring brands that utilize more advanced technology, such as color matching foundation or formulas with patented technologies. Besides expanding the consumer base and technology, M&As have helped companies reach new distribution channels and local markets. When researchers at AT Kearny looked into the monetary value gained by the acquirers in M&As, they found that the companies that acquired new brands more frequently (2 or more transactions a year) were able to increase their value quicker.
After an in-depth analysis of hundreds of mergers, AT Kearny concluded that the “industry is at a tipping point when the top 3 companies combined hold a 45% share of the market.” The key to success now depends on either acquiring more brands or being acquired. Acquiring new brands gives opportunities to create growth for specific categories, geographies, and channels, and is the future for growth in the beauty and personal care industry.