Swallowfield expands into branded beauty market with Brand Architekts acquisition
Also based in the UK, Brand Architekts owns and manages an expanding portfolio of mid-premium beauty and personal care brands that are supplied and distributed to major UK high street retailers, as well as having distribution in North America, Australia, the Nordic countries and Turkey.
Those brands include Dirty Works, Kind Natured, Argan, Happy Naturals, DrSalts, Superfacialist and Senspa, and manufacturing of these products is currently outsourced to contract supplier in both the UK and China.
Acquiring the business for £11m
Swallowfield is buying the business for a total of £11.0m, which includes stock and working capital of approximately £2.7m. The company will be acquired with an initial payment of £9.15m, followed by an earn out payment of £1.85m.
For the financial year ending 31st of January 2016, Brand Architekt had net sales of £10.7m, which represented £2.0m in profit before tax.
The company has been registering consistently high growth in the course of the last three financial years, with FY 14, FY 15 and FY16 representing CAGR EBITDA of 47%, a growth that Swallowfield executives believe can be maintained in the medium term.
Brand Architekts is a fast-growing business
Swallowfield directors outlined the fact that the strength of the Brand Architekt business would serve to offer the business strong growth potential in the future as well as serving diversify the business beyond the contract manufacturing core.
“The directors believe that through the synergistic acquisition of Brand Architekts there is currently an opportunity to significantly accelerate the 'owned brands' strategic pillar of Swallowfield's strategy,” the company stated in a press communication announcing the acquisition.
The company executives believe that Brand Architekt’s commitment to a continued pipeline of product innovation will be the main factor sustaining the continued growth of the newly acquired business.
Synergies and cost savings
Beyond this, the Swallowfield directors also pointed out that its existing beauty brands portfolio could be combined with the Brand Archiekt sales and distribution network in both the UK and worldwide.
Likewise, the company also states that economies of scale are expected to lead to significant synergies and cost savings, particularly in the areas oflogistic costs, sourcing synergies (particularly in China), finance and administration/customer service functions as well as giving Swallowfield's owned brand portfolio critical mass when buying public relations, media and display exposure.