By Allison Collins. Source: WWD.
Ares Management LP has signed an agreement to acquire DevaCurl for between $250 million and $300 million, according to industry sources.
The business, which makes hair-care products focused on curls, is projected to do at least $65 million in net sales for 2017, sources said. Ares is taking over 100 percent of the company from private equity backer Tengram Capital Partners and cofounder Dennis Da Silva.
This is Ares’ first foray into beauty, a category that investors have been clamoring to get their hands on after seeing some of the returns their private equity peers have reaped on beauty deals (IT Cosmetics sold to L’Oréal for a $1.2 billion, or a 6.1 times multiple, for example). While color cosmetics was the hot category of 2016, the M&A community had expected the deal flow to shift to other beauty verticals — like haircare — for 2017.
Dennis Gies, managing director at Ares, said the firm was interested in DevaCurl because of its positioning as a brand “to meet the needs of all women with curly, supercurly and wavy hair.”
“Our long-standing investment strategy is to partner with world-class management teams where our capital can be a catalyst for growth, and Colin [Walsh, chief executive officer] and his team at DevaCurl have built an incredible platform on which to build domestically and internationally. We are committed to providing the full resources of Ares’ global platform to help the company continue to grow its scalable franchise.”
Under Ares, DevaCurl will focus on geographic and education expansion, said Walsh. Outside of North America, DevaCurl is sold in Brazil, making South America a natural expansion opportunity, Walsh noted.
“South America feels like our most durable option, as we have infrastructure and we’re in the market now,” Walsh said. “Western Europe also feels like a great opportunity.”
Tengram invested in DevaCurl in 2013, brought Walsh on board and focused on growing professional and prestige distribution channels (the products business is split roughly 50-50 between professional and prestige distribution, a source noted). Outside of salons, DevaCurl products are sold at Sephora and Ulta Beauty. The business also operates Devachan, a group of curl-centric hair salons, and the Academy, which trains hairdressers on how to work with curls. Devachan is closing its White Plains, N.Y., salon later this year to focus on its two Manhattan flagships, according to Walsh.
“We recognized at the beginning that Deva was a company that had that perfect combination of great product and a highly, highly engaged curly-haired consumer,” said Tengram managing director Matthew Eby. “Dennis Da Silva did a good job of keeping the brand authentic and pure.”
“From a product standpoint, the big move was expanding to super curly and wavy — so specializing by curl,” Walsh noted.
In 2015, DevaCurl launched its Super Curly offering, followed in 2016 by wave-focused shampoo-and-conditioner combo Low-Poo Delight and One Condition Delight and styling product Wavemaker. This year, DevaCurl added Buildup Buster Micellar Water Cleansing Serum, a shampoo replacement product that can be used on all hair types to get rid of styling product buildup once per week. Later this year, the business will add masks to its lineup, Walsh said.
The brand has more than 200,000 followers on Instagram and works with an unpaid base of social media influencers, who receive free product but are not paid for posts.
“Our strategy of building a curl community and having that curl community speak openly and authentically to their own experience is central to our strategy,” Walsh said. “It’s not just limited to influencers.”
Vennette Ho from Financo handled the deal for Tengram. Jefferies advised Ares.