French beauty giant acquires edgy makeup brand to push further into fast-growing specialist cosmetics marketplace..The financial details were not disclosed but it is thought L’Oréal paid $300-400m (£187-250m) for the California-based company, which is owned by private-equity firm Castanea Partners.
Urban Decay crashed on to the beauty scene in the mid-90s with eye-catching packaging and products with names like Stray Dog, an ash-brown eye-shadow, and the pale purple Asphyxia.
The deal will give L’Oréal another entry into the fast-growing area of specialist brands, which it says represents 44% of the luxury makeup market in the US.
Will they continue with products of Urban decay or its a strategy to acquire the company and then remove competitive products of Urban Decay from Market. I remember back in 90s Rexona soap was quite a popular product giving tough competition to UniLever's (Then lever Brothers Pakistan) Lux. They acquire the company making Rexona and soon Rexona soap became history in Pakistan.
Well , very valid point Muqa, and its yet to be seen how they will progress further from here .. I hope they continue with the established product lines , UD has some very strong and unique presence in the market and it would be a bad deal seeing those product lines suffer ..
Well , very valid point Muqa, and its yet to be seen how they will progress further from here .. I hope they continue with the established product lines , UD has some very strong and unique presence in the market and it would be a bad deal seeing those product lines suffer ..
Time will tell , I guess ..
I'm not aware (read not interested) of the beauty products offered by these companies, but if the product range is similar, then it is likely that the acquirer will remove competitive products from market soon.
I also observed that companies are now concentrating on the core business and divesting from products line that they think are not their cash rich products or which receive tough competition. Unilever Pakistan divested from their fat business (including Dalda cooking oil and Blueband Mamargarine) under this strategy. Dalda was getting tough competition from local players Tullo and Habib Cooking Oil. There were also rumors that Unilever will stop manufacturing activity of tea (yellow Label, Supreme) in Pakistan and import the same, considering they are getting tough competition from Tapal.
Muqa, thats true, I have noticed that change significantly too .. just until a few years ago , two companies merging or one acquiring the other meant that two different brands would still cater to different segments of people , even with the same products with different qualities and price ranges ..
however recently, the trend is changing, acquiring the competition is more or less to kill it .. they might keep going with the brand with alternative products but will kill the specific items that are serving as competition to theirs .. acquiring has become more of a survival tactic now ..
All thanks to recession and economies getting slow :hinna:
Also from a business perspective, it sounds only wise that if competition has increased loads in a certain product market, and , the business has hit the peak and there is no more going upward or it takes too much revenue to take it to new heights , then stop the product and get into emerging markets .. Innovation is key to a successful business b*****ng …
IIt certainly does not look like loresl is going to remove decay product. Esp since product line is complimentary and is 44% of luxury market.
Easy to double check figures. Find out size of luxury mkt. Calculate 44% of it. That should equal decay revenues.
One big caveat - private equity folks load up companies they own with debt. Add this to the $350 M being paid to find actual amt being paid. Find P TO SALES p to e debt to equitet free cash flow etc. See if fcff enuf to sustain and pay down debt.
Without such analysis no way to see if acquisition good.
I faced this while discussing History of Brand and brand Consciousness in Arts channel
just realized .. I have even forgotten the word I used that the system caught as rude ! I am sure it wasnt a rude word at all 