Beauty and Personal Care Sector to See Sharp Increase in Consolidation and M&A Activity

CHICAGO, Dec. 8, 2016 /PRNewswire/ -- A new report by A.T. Kearney, "Shop or Drop: The Inevitable Path for Growth in Beauty," analyzes the M&A landscape of the beauty and personal care (BPC) market and predicts that the industry is ripe for consolidation and that M&A activity in the sector will accelerate. Survival of both large and small firms in the sector depends on making strategically smart acquisitions or being acquired. The study provides a detailed analysis of 214 BPC transactions that took place from 2010 to 2016.

The BPC industry has seen significant M&A activity in the past five years. The factors driving this intensification of inorganic growth are stagnant or slow growth in core markets and the highly concentrated nature of the industry; in both the mass and premium segments, the top three players account for 39 percent and 49 percent share respectively.

A.T. Kearney's Merger End Game methodology, which is based on the analysis of hundreds of mergers across industries, suggests that an industry is approaching a "tipping point" when the top three companies in the industry have a combined share of 45 percent or more. The beauty and personal care industry has reached this point.

Hana Ben-Shabat, A.T. Kearney partner and co-author of the report, stated, "Our analysis shows that large-sized corporations in the BPC industry cannot afford to be inactive in the acquisition game if they want to succeed."

The report provides case studies and insights on the four key drivers of M&A in the BPC sector:

• Access to consumers. The most widespread strategic M&A driver is the access to consumers. BPC players are looking to expand their share of wallet with new consumer segments.
• Access to innovation. Product life cycles are shortening and the ability to scan the market for innovation becomes critical. The BPC industry is increasingly behaving like the tech industry, where leaders leverage smaller rising companies as test labs.
• Access to channels. Another driver is the access to distribution channels. A significant number of transactions were motivated by the need to strengthen or build the sales infrastructure of the acquirer especially in the online channel.
• Access to markets. Expansion into new geographies is often a core driver of M&A plays. Acquiring or merging with local players enables rapid access to local distribution channels, bypassing the time and capital needed to build distribution from the ground up.

The analysis of the 214 BPC transactions between 2010 and 2016 also shows that companies in the sector that make acquisitions frequently (more than two transactions a year) have an enterprise value growth rate that is 26 percent higher than companies that had a lower level of transactions during the same time period.

For a copy of the report, please go to https://www.atkearney.com/consumer-products-retail.

About A.T. Kearney

A.T. Kearney is a leading global management consulting firm with offices in more than 40 countries. Since 1926, we have been trusted advisors to the world's foremost organizations. A.T. Kearney is a partner-owned firm, committed to helping clients achieve immediate impact and growing advantage on their most mission-critical issues. For more information, visit www.atkearney.com.

Contact: Jim Brown
A.T. Kearney
312-223-6220
[email protected]

Logo - http://photos.prnewswire.com/prnh/20120925/CG80591LOGO

SOURCE A.T. Kearney

Related Links

http://www.atkearney.com