CEW Mentoring EventEvan Merali, Director at Financo, Talks M & A in the Beauty Sector 
CEW was delighted to welcome Evan Merali of Financo to discuss the growing value of the beauty business, evidenced by the burst of mergers and acquisitions over the last 18 months. With nearly 10 years’ experience advising businesses in the Retail and Consumer sectors, Evan joined Financo in 2014 and is responsible for Financo’s coverage of Beauty and Personal Care companies in Europe. 
Since 2010, there have been over 80 transactions of significant scale across all categories in Beauty (i.e. skincare, fragrance, hair care and cosmetics). The level of activity has been split between private equity funds providing growth capital and large corporates acquiring strategic brands. 
A lot of the M&A activity in the industry is driven by growth, Evan explained. The large corporates make acquisitions to supplement their own organic growth, and the private equity community loves the space because the strong growth potential of Beauty brands (potential to add new SKUs, go into adjacent categories, and gain international scale) means that they can generate fantastic returns for their investors 
The shifting industry landscape proved an interesting talking point. Evan thinks that the internet and social media has had a huge impact on the beauty landscape (and indeed the general retail and consumer landscape). There is a need to engage with the consumer on a more personal level by building a lifestyle and atmosphere around the brand. This is particularly important for beauty brands which may not necessarily have their own distribution (i.e. their own stores). The consumers want authenticity and heritage which is why ‘indie brands’ are continuing to grow. Social media is where a lot of these brands create their environment, and for growing brands it can be a powerful, cost-effective marketing tool. 
Evan explained how concepts of the new natural, personalised beauty, devices and tools, professional and targeted skincare, and fast beauty have all played a part in the landscape. The new natural is the natural evolution of the wider lifestyle shift towards healthier and more wholesome living. Evan explained that brands which have a personalisation or digital element to them are getting a lot of attention from the Venture Capital community, who are not traditionally investors in Beauty, because of the scope to use customer data to generate additional revenue streams. Brands which have been able to own an innovative device or traditional tool category can often do well by moving into adjacent product categories that make sense. Leading on from the new natural, professional and targeted skincare brands are still very popular and benefit from the credibility of being associated with skincare professionals or doctors. Lastly, Evan thinks that there is starting to be a proliferation of fast beauty brands – i.e. brands which adopt a “fast fashion” approach to Beauty. These value brands typically own their own retail stores, which is an interesting development in the mass Beauty segment. 
One of the biggest challenges for growing brands is identifying the best source of capital, and this can be difficult for brands which aren’t yet of the right size to be appropriate for private equity or venture capital investment. Evan believes that crowd funding has been a great success for a number of consumer brands and businesses, and could potentially fill the gap that is traditionally occupied by angel investors (who can be difficult to find). 
Financo has been leading the charge advising Beauty businesses for years and have a dedicated Beauty team which is really passionate about the space. The level of activity shows no sign of cooling off – it really is a great time to be in the Beauty industry!
CEW’s Mentoring Series - where leading executives offer insights into beauty industry issues and inspiration for professional growth.
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