o Wealthmonitor reported on Drunk Elephant roughly seven months before being acquired by Shiseido.
11 July 2019 - 12:00 am UTC
Drunk Elephant taps Financo for expected sale, sources say
12/24/2018
Drunk Elephant, the natural skincare company backed by investors including VMG Partners, has retained Financo as its financial advisor to explore a sale, said two sources familiar with the matter.
A process for the Houston-based company is expected to launch in 2019, one of the sources said. A third source familiar with the matter said pitches for the sale mandate were held earlier this month.
Asked about the company’s size, two of the sources and a sector advisor said Drunk Elephant had north of USD 50m in revenue. Each emphasized the company’s significant growth in recent years, with one noting that Drunk Elephant nearly tripled its sales in 2017. The same source said the company has an EBITDA margin of approximately 20%.
Given its rapid growth rate and positioning in the trendy natural skincare space, Drunk Elephant could fetch up to 7.5x revenue in the event of a sale, said the third source.
Logical strategic suitors for Drunk Elephant include Estee Lauder and Unilever, said two of the sources and a second sector advisor. The company could also be a fit for The Colgate-Palmolive Company or Procter & Gamble, according to the first source.
While the third source and second sector advisor said L’Oreal would typically be another logical suitor for Drunk Elephant, the companies are currently entangled in a patent lawsuit. Last month, the American arm of L’Oreal filed a lawsuit against Drunk Elephant in Texas court, alleging that the brand’s Vitamin C serum is infringing upon a patent it has held since 2007. Drunk Elephant declined to comment on the lawsuit. L’Oreal did not return requests for comment.
Estee Lauder has been an active buyer of indie beauty brands, acquiring California-based Too Faced Cosmetics, which generated USD 270m in net sales in 2016, for USD 1.45bn that same year. More recently, in June 2017, the New York-based beauty giant also acquired a minority stake in natural Canadian skincare brand Deciem.
Unilever has also been active in skincare M&A, purchasing Korean skincare company Carver Korea for EUR 2.27bn in 2017 and acquiring a 75% stake in Italian skin and haircare brand Equilibra this July. Last December, Colgate Palmolive acquired skincare brands PCA Skin and EltaMD in two separate transactions. Procter & Gamble also took a stake in independent skincare in July when it acquired First Aid Beauty for a reported USD 250m.
Private equity firms could also express interest in the company, the second sector advisor said.
Drunk Elephant was founded by Tiffany Masterson in 2012. The brand emphasizes a natural ingredient profile and its products are also free from the “Suspicious 6” ingredients known to irritate skin, including fragrance and silicone. The company’s product line-up includes masks, cleansers, serums, sun protectants and moisturizers.
VMG Partners and Leandra Medine, founder of fashion blog Man Repeller, acquired a minority stake in Drunk Elephant in March 2017. In a 2017 interview with WWD following the investment, Masterson said that Drunk Elephant was still majority family-owned.
Drunk Elephant declined to comment. Financo, VMG Partners and Medine did not return requests for comment.
Drunk Elephant taps Moelis as co-advisor for expected sale – UPDATE
Drunk Elephant, a Houston-based natural skincare company, has retained Moelis to co-advise on its sale process, which was reported as being advised by Financo last month by this news service, said two sources familiar with the matter.
The process for the Houston-based company is expected to launch by the end of 1Q19, the sources added.
Drunk Elephant is backed by VMG Partners and Leandra Medine, founder of fashion blog Man Repeller. As earlier reported, the company is said to have USD 50m in annual revenue and an EBITDA margin of around 20%, and a potential valuation of 7.5x revenue.
Estee Lauder, Unilever, The Colgate-Palmolive Company and Procter & Gamble were named as logical suitors for Drunk Elephant in the earlier report, along with private equity firms.
VMG and Medine acquired a minority stake in Drunk Elephant in March 2017, with the rest retained by family, according to news reports.
Drunk Elephant and Moelis declined to comment. Financo, VMG Partners and Medine did not return requests for comment.
