Suppliers of natural ingredients are the most attractive acquisition targets

Dynamic Personal Care Actives Market Draws Heightened M&A Activity, Particularly in the Naturals Space

Globally, the personal care active ingredients market is one of the most innovation-driven ingredients marketplaces after pharmaceuticals. The ever-increasing quest for natural products with high efficacy and visible results by consumers drives the industry towards a dynamic environment of research and technological competence. This dynamic marketplace, offering viable growth opportunities, is drawing investments within the personal care active ingredients market.

The key markets of Brazil, China, Europe, and the United States are estimated at USD 1.1 billion. It is a highly desirable segment with a forecast compound annual growth rate (CAGR) of over 6% during the 2016 to 2021 timeframe. Driven by consumers’ preference towards more natural products, botanicals and biotechnology are now the fastest growing categories. Marine ingredients is another rapidly growing segment, drawing the attention of some important M&As.

Among the goals of many M&A activities in this sector is the sustainability of sourcing, and hence, strong focus on biotechnology and natural ingredients. In the last few years, the industry witnessed some major activities. Large, well-positioned and established ingredient suppliers continue to seek growth through acquisitions to expand their product and technology portfolio into actives. Similarly, suppliers of flavors and fragrances, such as IFF, Givaudan, and Takasago, have expanded their footprint in personal care initially with the acquisitions of such active suppliers like Lucas Meyer, Induchem and Soliance, and Centre Ingredient Technology, respectively.

Furthermore, only a few weeks ago, Croda announced its takeover of the marine biotechnology specialist, Nautilus, to further expand its expertise in biotechnology. Croda, already having worked with Nautilus for the past six years in developing specific applications for skin care and hair care, now intends to establish Nautilus as the Croda Centre of Innovation for Marine Biotechnology. The company aims to bring new patented green- and white-biotechnology ingredients to market resulting from this acquisition.

In December 2017, the Dutch multinational DSM and the renowned renewable cosmetic ingredients supplier Amyris finalized their cosmetics and fragrance manufacturing partnership in Brazil. Acquiring Amyris’ biotech production facilities in Brazil, DSM aims to further enhance its fermentation-based ingredients production capabilities in the personal care sector.

Givaudan, the Swiss specialist in flavors, fragrances, and active beauty, announced its collaboration with Draco Natural Products, offering research and development capabilities in creating nutricosmetic topical products. The collaboration, which was announced in October 2017, aims at developing a new anti-aging and moisturizing range of products with bioactive botanical ingredients derived from traditional Chinese medicine. Givaudan had completed its acquisition Vika B.V. to strengthen its portfolio of natural dairy solutions in 2017 and announced the acquisition of the nutrition division of Centraflora Group (Centraflora Nutra) to strengthen its global offering of natural extracts, particularly from the biodiversity of Brazil. Givaudan also acquired Activ International in early 2017 to add a range of natural and organic flavors, marine extracts, and seafood- and vegetable-based ingredients to its portfolio.

German chemical giant Evonik announced its acquisition of Hamburg-based Dr. Straetmans GmbH, a cosmetic ingredients producer in March 2017. This move particularly brings Dr. Straetmans’ expertise in alternate preservation systems, allowing Evonik’s Personal Care Business Line to offer a more complete range of formulation solutions. In late 2016, Evonik acquired J.M. Huber’s silica business, raising its position as a supplier of silica in many industries, including cosmetics.

In early 2017, Air Liquide’s subsidiary, Seppic, finalized the acquisition of the Serdex division of Bayer, strengthening its footprint in natural active ingredients for cosmetics. Serdex’s acquisition further adds a range of botanical active ingredients for dermo-cosmetics and skin treatments to Seppic’s portfolio, building upon its 2013 acquisition of BiotechMarine that brought a range of marine derived active ingredients.

In late 2016, France-based plant biotechnology major, Greentech, acquired Brazilian company, Mapric, a provider of active ingredients for cosmetic, pharmaceutical, and nutraceutical industries. Mapric’s capabilities complement that of Greentech in development and production of high-tech active ingredients from the plant, marine, and microbial worlds, and strengthens Greentech’s position in Brazil.

The year 2016 also saw the acquisition of France-based, Algues & Mer by another French cosmetic active ingredient major, Solabia. This acquisition brought Solabia access to the biosphere reserve of the Iroise Sea in the Island of Ouessant (Brittany, France), where the company is currently applying its expertise to develop new molecules in the rapidly growing world of algae-based actives.

Ingredients suppliers also seek collaborative opportunities to expand their geographical reach. In April 2016, the global specialty chemical company, Clariant, purchased a 17% stake in natural active ingredients supplier BioSpectrum. South Korea-based BioSpectrum offers many specialty active ingredients based on Asia’s native flora and is an important supplier in the Korean natural beauty market. The partnership aims at leveraging Clariant’s global sales and innovation network to market BioSpectrum’s active ingredients worldwide.

The personal care ingredients industry also continues to witness new entrants. A new Canadian supplier of natural biomaterials, Mirexus Biotechnologies, is in the process of commercializing a nanotechnology facility to use its new filtration process to extract glycogen from locally-grown sweet corn; the new bio-nano-ingredient, called PhytoSpherix, has a unique profile of safe, biodegradable, and non-toxic, and is aimed for use in personal care and cosmetics.

Birkenstock, a German manufacturer of cork sandals, is entering the skin care segment, primarily with cork oak as an ingredient targeted at anti-aging. Birkenstock’s expansion into skin care is set to use its “natural” brand image to venture into the lucrative natural cosmetic ingredients market.

Active ingredients for personal care will not cease to be an interesting and attractive marketplace anytime soon. It will continue to offer opportunities of different types of acquisitions and collaborations resulting in strategic growth through market or segment entry, better and more product offerings, and greater reach in the market, though the overall number of opportunities will lessen and the EBITDA multiples paid will remain, as the competition to expand portfolios and/or enter new/adjacent markets, products and technologies remains high. For a comprehensive knowledge of this market’s dynamics, trends, sizes, competition, and outlook in different regional markets, Kline offers a series of in-depth reports in its program Specialty Actives in Personal Care: Multi-regional Market Analysis and Opportunities.

Kline’s Specialty Actives in Personal Care: Multi-regional Market Analysis provides a detailed appraisal of the key regional markets, including Europe and the United States, but also the developing China and Brazil. The study covers botanical actives, biotechnology products, marine ingredients, proteins and, enzymes and coenzymes, as well as synthetic active ingredients. To gain additional insights, request our factsheet.

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