The Power of a Magic Serum: Conglomerates compete to buy Charlotte Tilbury

May 21, 2020

3 min read

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What's going on here?

The British make-up and skincare brand Charlotte Tilbury is up for sale at a selling price rumoured to be over the £1bn mark. With a deal to be agreed imminently, global beauty giants, including Unilever, L’Oréal and Estée Lauder, are amongst those who have expressed significant interest.

What does this mean?

Charlotte Tilbury is an instantly recognisable name in the luxury goods and skincare market. The products launched by the MBE make-up artist are prominently displayed on shop floors, from Harrods to Harvey Nichols. Recently the brand was listed in the London Stock Exchange report as one of 1000 Companies to Inspire Britain. Reports that Charlotte Tilbury’s sales rose by 44.5% to £145m in 2018 further reinforce the brand’s commercial success.

It is perhaps no surprise then, that the 7-year old private company was on investors’ radars, with a first takeover offer by Estée Lauder facilitating a bidding war and giving Tilbury further options to make up her mind. A combination of sorts, therefore, would not only generate a significant amount of wealth for the brand and its shareholders – with profits set to be around £500m – but also potential synergistic value.

What's the big picture effect?

Amid a backdrop of, for-the-most-part, stalled M&A activity, this story offers a ray of hope. Across sectors numerous deals have fallen victim to the adverse effects of the coronavirus pandemic, often citing uncertainty or a general drop in market activity as key reasons.

For legal professionals familiar with upper mid-market and premium deals, the opportunity to represent either Charlotte Tilbury (otherwise known by its brand parent company name Islestarr Holdings) or the respective buyer would result in serious earnings for the firms involved. If Charlotte Tilbury were to find a suitable buyer, lawyers would then be instructed to undertake due diligence followed by extensive negotiation procedures.

From how Charlotte Tilbury positions herself within the firm, as founder, president, COO (chief creative officer) and less officially as the face of the brand on social media profiles, the structure of the deal is also likely to be further complicated. It is currently estimated that the female entrepreneur owns up 75% of the brand’s shares and voting rights. It is with this in mind that a certain wariness might need to be deployed against private equity houses attempting to gain a majority stake, threatening the pre-existing structure and management.

Absorbing younger and millennial-friendly brands is also part of a wider investment strategy to diversify their portfolio. This story closely aligns with the trend to invest in trendy yet profitable start-ups such as Kylie Cosmetics. The $845m acquisition of skincare brand Drunk Elephant by Japanese beauty giant Shiseido (another potential buyer for Charlotte Tilbury) forms another key example.

Regarding the timing of the deal, the luxury sector as a whole does not fare well in economic downturns. Consumer cash is generally reserved for more essential purchases and so the sale could be perceived in two ways. Firstly, it could be seen as a defensive strategy to prevent hostile takeovers if the company becomes under-capitalised or distressed. On the other hand, the make-up artist has already won the backing of investors including Venrex and venture capital firm Sequoia Capital (who holds a minority stake). Rather than being dependent on this transaction, it provides a market opportunity for Charlotte Tilbury to further cash in and stimulate even more growth.

Report written by Katrina Hughes

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