Why Did L’Oreal Agree To Acquire US Based Prestige Beauty Company, IT Cosmetics?
On July 22nd, L’Oreal announced an agreement to acquire U.S. based prestige beauty company, IT Cosmetics, for $1.2 billion. Touted as one of the most rapidly growing U.S. prestige beauty brands, IT cosmetics was established in 2008 by Jamie Kern Lima and Paulo Lima and is co-owned by TSG Consumer Partners. The company teams up with the leading plastic surgeons in the country to provide women with over 300 innovative makeup and skincare products. The company, which will be a part of L’Oreal’s Luxe Division, had recorded net sales of $182 million over the last twelve months ended June 2016, reflecting a 56% year-on-year growth.
L’Oreal is the current leader in the beauty market and has the largest global market share in the makeup and skincare segments. In the figure below, we see how these segments are expected to grow for the company. According to a Bloomberg report, there has been a recent growth in the sale of premium beauty products. L’Oreal’s premium categories were its fastest growing segment in the first quarter of 2016. With the increase in purchasing power, the premium cosmetics have become more affordable among many women. Hence, acquiring a fast growing premium beauty company can further bolster L’Oreal’s growth in the skincare and beauty segments.
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