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Will Beauty Companies’ Acquisition Activities Help in 2Q16?

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European Union cleared Coty’s acquisition

The beauty and personal care sectors have seen a high level of merger and acquisition (or M&A) activity in the last two years. On February 16, 2016, the European Union cleared Coty’s (COTY) acquisition of 43 Procter & Gamble (PG) beauty products, concluding that market competition would remain strong. Coty will buy P&G’s businesses for $12.5 billion.

Coty estimates an immediate 2% increase in the pro forma operating profit margin to 14% once the deal has closed. According to Reuters, Coty would become the number one perfume maker ahead of L’Oréal (LRLCY) and the number three make-up provider behind its French rival and Estée Lauder (EL).

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By Kilian acquisition

On February 25, 2016, EL acquired By Kilian, the Paris-based luxury fragrance brand, for an undisclosed amount. By Kilian is sold in more than 40 countries and its current product offerings include fragrances, candles, other accessories, as well as exclusive collections available in certain regions.

Through this acquisition, Estée Lauder will hold a strong portfolio of fragrances that will give EL a strategic opportunity to gain market share in the ultra-luxury fragrance category.

With more acquisitions in the fragrance business, consumers will benefit from the array of choices in fragrances from companies like Avon (AVP), Estée Lauder, LVMH Moët Hennessy Louis Vuitton S.E. (LVMUY), and L’Oréal.

E-commerce and personal care

Coty recently acquired Beamly, a digital marketing firm, which will help the company in accelerating growth, sales execution, and e-commerce. Coty also announced the completion of the Hypermarcas beauty and personal care business acquisition. This transaction will strengthen Coty’s presence and infrastructure in Brazil, one of the largest beauty markets in the world.

Coty and EL together make up 0.2% of the iShares Core U.S. Growth ETF (IUSG).[1. Updated on July 13, 2016]

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