Sale of Carver to Unilever made Korean PE history, analysts reveal

By Richard Whitehead

- Last updated on GMT

Sale of Carver to Unilever the most profitable private equity acquisition in the country’s history. ©Carver Korea
Sale of Carver to Unilever the most profitable private equity acquisition in the country’s history. ©Carver Korea
A KRW300bn investment in a South Korean cosmetics firm in 2016 has proved to be the most profitable private equity acquisition in the country’s history, a new analysis of data has shown.

The US$263.5m deal, led by a consortium of Bain Capital and Goldman Sachs for Carver Korea, returned more than six times the invested capital after just a year, analysts at Korea Economic Daily​ found.

The two financiers came out of the deal with proceeds of KRW1.9tr (US$1.6bn) from the sale of shares in Carver Korea to Unilever for around KRW3tr in 2017.

Founded in 1999, Carver had shown exponential growth over five years prior to the sale. Starting off as an aesthetics company supplying professional products to beauty salons, it since became the fastest-growing skincare business in South Korea, through sales of its brand, AHC.

AHC’s portfolio is focused on age management and hydration and nourishment. The range includes a hero product, Eye Cream for Face, along with essences, toners, moisturisers, masks, and sun protection.

Alan Jope, Unilever’s president of beauty and personal care, said at the time: “[The acquisition] will significantly strengthen our position in North Asia, the largest skincare market in the world. AHC has been strongly gaining popularity thanks to its efficacious, innovative and premium products, and it, therefore, offers great opportunities for growth​.”

The sale of Carver to Unilever marked the highest rate seen for private equity transactions in South Korea after the Korea Economic Daily​ reviewed 42 deals announced since 2009 and valued at KRW100bn or above. It was after this year that the private equity market began to swell in the country.

Investors still keen on K-beauty

Korean cosmetics continue to be attractive to private equity investors. Last year, CDIB Capital closed on an investment in ECIS Cosmetic, a Korean ODM/OEM manufacturer specialising in the production of premium facial masks and other skin and hair care products.

Founded in 2007, ECIS stands to benefit from the rising popularity of South Korean skincare brands and increased demand for fast “K-Beauty” products in Asia and globally.

We have spent a considerable amount of time exploring the entire cosmetic value chain and identified ECIS as a leading ODM/OEM manufacturer​,” said HY Kim, CDIB Capital’s managing director.

With the increasing popularity of fast Korean skincare and cosmetics, ECIS is expected to be a primary beneficiary of the growing demand for made in Korea products​.”

The previous year, the Hong Kong-based investor acquired a stake in L&P Cosmetic, a leading Korean skincare company that specialises in facial sheet masks, for an undisclosed sum.

We have witnessed the phenomenal growth of cosmetic contract manufacturers in South Korea driven by their strong value propositions, including product innovation abilities and short time-to-market​,” said Lionel de Saint-Exupéry, chairman and chief executive of CDIB Capital.

Another investor keen to tap into the country’s cosmetics industry is an alliance between the family holding company of LVMH chairman Bernard Arnault and Connecticut-based private equity group Catterton, which has acquired a minority stake in Korean brand Clio Cosmetics.

As Korea continues to dominate in leveraged loans on private equity in Asia, it provides fertile ground for international companies looking to make acquisitions.

"Foreign investors having been piling into the Korean cosmetics business in recent years, emboldened by the country's success in exporting a 'Korean Wave' culture built around music, fashion and beauty products​,” according to Reuters.

Bae Suk-hee, Seoul-based team head in the M&A department of Korea Development Bank, told Bloomberg: “Private equity firms especially from abroad seem to be actively looking at Korean companies, especially in the biopharmaceutical and cosmetics industries, and they are seeking loans for those acquisitions.​”

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