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KKR prevails in Coty deal

Updated: May 27, 2020

In one of the most competitive M&A (Mergers & Acquisitions) battles in the history of the sector, KKR came out the winner in the deal reached for Coty Professional Beauty.

The strategic partnership involves the sale of a 60% majority stake in Coty’s Professional Beauty and Retail Hair Business, including the OPI, Wella, Clairol and ghd brands, at a contemplated enterprise value of $4.3 billion.

Coty will retain the remaining 40% interest in the business, which is number two in the salon hair care industry behind world leader, L’Oréal, along with OPI professional nail care. KKR faced a formidable opponent in Henkel which, for the second time, was a top contender for this business, having lost out to Coty in 2015 when Procter & Gamble sold the business.

If a deal had been reached by the end of 2019, the outcome likely would have been different. With COVID-19 raging across the globe in earnest in early 2020, the professional beauty business has been among the hardest hit, with salon shutdowns bringing this high-touch service industry to a virtual halt. This has had a direct and immediate impact on Henkel, Coty and many others, with industry revenues headed for a steep decline in 2020 and a long road ahead for recovery. However, with this bleak outlook, the dynamics of the Coty Professional Beauty deal shifted, giving the upper hand to KKR, with Henkel’s position as a strategic buyer weakened due to the challenging current and future state of the salon industry.

While KKR will face challenges ahead with the Coty Professional Beauty business, international consulting and research company, Kline, believes that the company will be able to adapt and focus its resources based on the changes in hair and nail salons, along with variations in consumer behavior. It expects the OPI professional nail care brand to seek greater retail and online sell-through, as nail salon businesses are likely to suffer the greatest closure casualties in the professional beauty market.

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