Spanish beauty conglomerate Puig has acquired a majority stake in luxury skin-care brand Dr. Barbara Sturm.
While terms of the deal were not disclosed, WWD previously reported that Dr. Barbara Sturm’s annual sales were around $77 million. Puig has been one of the newer strategic acquirers in recent years, building up an arsenal of beauty brands as it aims to compete with established players like L’Oréal Group and The Estée Lauder Companies, plus emerging players like Kering Group. Previously, Puig purchased a majority stake in Charlotte Tilbury in 2020, which reportedly valued the makeup brand at $1.2 billion, as well as Byredo in 2022 also for a reported $1.2 billion, and beauty and wellness brand Kama Ayurveda in 2022 for an undisclosed sum.
The 10-year-old Dr. Barbara Sturm brand has a network of spas and boutiques in Düsseldorf, Germany; London; New York; Los Angeles; Dallas; Jakarta and Singapore. The brand has cultivated a strong, buzzy following for its anti-inflammatory products among celebrities like models Bella Hadid and Elsa Hosk, plus Gwyneth Paltrow and Jennifer Garner.
“[Last year] was a relatively quiet year [for M&A], but beauty is a resilient market space that will be attractive. Its characteristics are stable and attractive, insofar as long-term [acquirers] are concerned,” said Andrew Charbin, managing director of retail and consumer division for PwC Corporate Finance. “We’ll see fewer transactions in the next couple of years, but the transactions that take place will be a lot more meaningful and the quality of the [acquired brands] will be, generally speaking, higher, in terms of having more scale, proven distribution and perhaps more international traction.”
Per Glossy’s previous reporting, citing September data from Capstone Partners, 2023 M&A activity in the beauty sector fell 23.5% year-over-year between January and September, with only 39 transactions announced or completed. The skin-care segment comprised the highest percentage of M&A targets, accounting for 46.2% of year-to-date transactions.
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According to industry experts, the primary causes of this slower deal flow are higher interest rates, persistent inflation, recession concerns and seller-buyer valuation gaps. Consumer price data published on Thursday from Federal Reserve officials, the White House and American households showed that inflation continued to slow at the end of 2023, but prices overall climbed more quickly in Dec. 2023 than Nov. 2023: 3.4% versus 3.1% the year prior, which was more than economists had forecast. Fed officials raised rates throughout 2022 and 2023 to try to get inflation under control. The Fed’s main policy rate now stands at 5.25-5.5%, up from near zero in early 2022. If inflation continues to slow, central bankers could begin to lower interest rates to more normal levels, which would prop up the private investment and M&A space as it would make VC investments more attractive and large-scale transactions easier to finance.
“[Stakeholders] are generally concerned with the macroeconomic environment,” said Sasha Radic, managing director of beauty and wellness investment banking at Jefferies. “They’re seeing pressure in international markets like China, which is impacting strategic performance and brands’ ability to drive near-term growth through geographic expansion. We’re seeing inflationary pressures and financing challenges. All of that is creating a higher-risk environment for deal execution.”
According to Jefferies analysts, deal flow resumption is expected during 2024. Analysts expect that brands within the clinical skin-care category will remain in high demand and that artisanal fragrance brands will also be attractive options for acquisition.
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“We are very excited to welcome a brand of the caliber of Dr. Barbara Sturm to our House of Love Brands,” said Marc Puig, chairman and CEO of Puig, in a press release. “With its science-focused skin-care product range and high-performance treatments, we are taking another important step in expanding our position in the premium skin-care segment. The new partnership reinforces Puig skin-care segment and our presence in the U.S.”
