LG Household continues cross-border M&A push in cosmetics market

  • 2020-09-16

LG Household & Health Care Ltd. was the most aggressive South Korean cosmetics firm in the cross-border M&A market between 2010 and 2019, with the value of the global acquisition market for makeup brands posting explosive growth over the past five years, according to a Samjong KPMG report on Sept. 16.

The Korean skincare and daily necessities maker snapped up more than 20 rival companies between 2010 and 2019 to diversify its product line-up and expand sales channels, as well as to secure new brands with high growth potential.

One of the acquisitions included the $125 million purchase of US health and beauty brand New Avon in 2019.

Going forward, LG Household is expected to continue the M&A push abroad. Its parent LG Group reportedly held three-day training seminars for its in-house lawyers earlier this month, during which it invited cross-border M&A lawyers from local law firm Shin & Kim LLC and discussed the M&A trends.

In February of this year, LG Household took over Asia and North America business licensing for the Physiogel skincare brand from GlaxoSmithKline plc. for 192.3 billion won ($164 million). Its hometown rival AmorePacific Corp. acquired a 49 percent stake in Australian skincare brand Rationale Group Pty for 50 billion won in March.

In the inbound M&A market, foreign companies acquired 11 South Korean cosmetic brands for a total of $5 billion between 2015 and 2019, said Samjong KPMG in its report on the cosmetics industry’s global M&A and new trends. It included L’Oréal’s purchase of South Korean indie makeup brand Nanda Ltd. for about 600 billion won in 2018.

South Korea climbed to eighth place on the inbound M&A league table for cosmetics deals.

In comparison, between 2010 and 2014, only four inbound deals worth $215 million involved Korean cosmetic firms.

Globally, cross-border M&A transactions in the cosmetics industry reached $127.1 billion between 2014 and 2019, almost three times more than the $44.3 billion between 2010 and 2014.

Last year, cross-border transactions accounted for 89.0% of cosmetics companies’ M&A deals in value, or 45.2% in the number of deals.

By investor, private equity firms were the most aggressive buyer of cosmetic firms between 2015 and 2019, accounting for 39% of the deals, followed by investment companies with 25%.

To keep up with new consumption trends, Samjong KPMG advised companies to build outstanding indie beauty brands to target millennials, or those born between the early 1980s and the mid-1990s; and develop bespoke cosmetics products tailor-made to individual consumers’ preferences and skin types.

Additionally, companies need to keep a close watch on the emerging trends, under which consumers increasingly opt for companies committing to high ethical standards and sincere customer care. With the spread of infectious diseases and environmental pollution, healthy ingredients and cosmeceuticals, or cosmetics products believed to have medical benefits, will also come into the spotlight, according to the report.

By Ri-Ahn Kim
knra@hankyung.com

<Edited by Yeonhee Kim>