Lornamead is ramping up its firepower to another level in pursuit of unwanted brands with big potential. Glynn Davis reports
Consolidation among the multinational branded consumer goods companies is moving onto the next stage. Not only small but larger non-core ‘orphan’ brands are now being offloaded in a continuation of the widespread trend set in motion in the late 1990s when Niall FitzGerald, chairman of Unilever, announced his company was to pursue its Path to Growth strategy that focused it purely on running large global brands.
In the thick of this action is a leading marketer of home and personal care products, Lornamead Group, which acquired the Triple Dry (above) and Christy skin care brands when it bought Network Health and Beauty in April.
The chief executive of this Dubai-based family-owned business, Mike Jatania, says the multinationals have been building up ever more sizeable global brands and this is prompting them to sell off ever-larger orphan brands that don’t have the required scale. As evidence of the trend, Jatania says: “As P&G acquired Clairol from Bristol-Myers Squibb in addition to Wella, to strengthen its hand in Europe against L’Oréal, this will bring about large orphans they don’t want.”
Like its contemporaries (see box) Lornamead’s targets are orphan brands in the home and personal care categories that sell in a single ‘local’ country or a ‘region’ - comprising a number of countries - and have been neglected as the multinationals have pursued their global brand strategies. Jatania says they might have been “harvesting” these brands - which involves them providing limited input, marketing or promotion - for up to two years to just keep them “ticking over” before deciding to sell.
Unusually, Lornamead recently stepped outside these parameters when trying to buy well-known lighters and lighter fuel brand Ronson, which it would have developed into a home care products brand. “We did the due diligence but decided not to pursue it. It was unusual for us, but we looked at it from a brand name perspective,” says Jatania.
However, its core business remains buying established brands to create value by
improving the packaging, changing the formulae and bringing greater focus through customer research and focus groups. Lornamead gave this treatment to Stergene after buying it from Unilever and introduced smaller doses, added a dosage cap and developed a formula specifically for black fabric. What Lornamead does not get involved in is manufacturing. It outsources the function for all its brands. Jatania is willing to admit it is “not rocket science”.
It might not be, but using this strategy Lornamead has bought 14 brands since 1997 including local “jewels” such as Harmony and well-known regional brands such as Lypsyl. It focuses specifically on oral, skin care, hair care and male grooming and is looking to own up to 12 brands in each.
While this has been successful, the company is in the process of adapting its model to take advantage of the trend for bigger orphans. It is using its London outpost to target larger deals throughout Europe. In preparation it has brought on board senior executives from the likes of Revlon, Henkel, Clairol and P&G. Jatania says: “Our portfolio has grown to the size that’s created the platform for us to now grow significantly. So for the past 12 months we’ve been focused on the £50m deals rather than those at £2m.” Jatania reveals that Lornamead is in the running for a brand in the £200m region and hints it could soon be bidding for deals up to £500m. “We’re starting to see opportunities so if it makes sense and the value is there…” He adds that Lornamead will take over day-to-day management within three months and the supply chain within six. “And we pay cash.” In contrast, the VCs may pay “a bit more”, but will also demand longer transition times.
Helping Lornamead fund bigger deals was the launch on the London Stock Exchange in December last year of its EPIC Brand Investments fund that was created to co-invest in deals with Lornamead. It raised £50m, but with additional debt funding it has an “immediate firepower” of £150m.
With investors in the fund including HSBC, Merrill Lynch and UBS, Jatania says it could grow much larger than £150m. He says these institutions are keen to inject further funds, and there is also the option of issuing bonds. This extra firepower will also enable the company to look at portfolios of brands, which are increasingly being offloaded by multinationals that choose to focus on specific categories. Jatania cites the $400m portfolio of brands that Unilever put up for sale in the US as evidence.
Lornamead is appointing an investment bank to provide deeper links into the managements of the major multinationals. “This signifies a step change in the size of acquisitions we’re going for as these banks don’t get involved unless the deals are for hundreds of millions,” says Jatania.
The shop for brands has just begun. As operators like Lornamead engage in the consolidation of home and personal care brands, it is inevitable that they too will have orphan brands. Smaller brand operators will buy them. So the cycle continues.
Consolidation among the multinational branded consumer goods companies is moving onto the next stage. Not only small but larger non-core ‘orphan’ brands are now being offloaded in a continuation of the widespread trend set in motion in the late 1990s when Niall FitzGerald, chairman of Unilever, announced his company was to pursue its Path to Growth strategy that focused it purely on running large global brands.
In the thick of this action is a leading marketer of home and personal care products, Lornamead Group, which acquired the Triple Dry (above) and Christy skin care brands when it bought Network Health and Beauty in April.
The chief executive of this Dubai-based family-owned business, Mike Jatania, says the multinationals have been building up ever more sizeable global brands and this is prompting them to sell off ever-larger orphan brands that don’t have the required scale. As evidence of the trend, Jatania says: “As P&G acquired Clairol from Bristol-Myers Squibb in addition to Wella, to strengthen its hand in Europe against L’Oréal, this will bring about large orphans they don’t want.”
Like its contemporaries (see box) Lornamead’s targets are orphan brands in the home and personal care categories that sell in a single ‘local’ country or a ‘region’ - comprising a number of countries - and have been neglected as the multinationals have pursued their global brand strategies. Jatania says they might have been “harvesting” these brands - which involves them providing limited input, marketing or promotion - for up to two years to just keep them “ticking over” before deciding to sell.
Unusually, Lornamead recently stepped outside these parameters when trying to buy well-known lighters and lighter fuel brand Ronson, which it would have developed into a home care products brand. “We did the due diligence but decided not to pursue it. It was unusual for us, but we looked at it from a brand name perspective,” says Jatania.
However, its core business remains buying established brands to create value by
improving the packaging, changing the formulae and bringing greater focus through customer research and focus groups. Lornamead gave this treatment to Stergene after buying it from Unilever and introduced smaller doses, added a dosage cap and developed a formula specifically for black fabric. What Lornamead does not get involved in is manufacturing. It outsources the function for all its brands. Jatania is willing to admit it is “not rocket science”.
It might not be, but using this strategy Lornamead has bought 14 brands since 1997 including local “jewels” such as Harmony and well-known regional brands such as Lypsyl. It focuses specifically on oral, skin care, hair care and male grooming and is looking to own up to 12 brands in each.
While this has been successful, the company is in the process of adapting its model to take advantage of the trend for bigger orphans. It is using its London outpost to target larger deals throughout Europe. In preparation it has brought on board senior executives from the likes of Revlon, Henkel, Clairol and P&G. Jatania says: “Our portfolio has grown to the size that’s created the platform for us to now grow significantly. So for the past 12 months we’ve been focused on the £50m deals rather than those at £2m.” Jatania reveals that Lornamead is in the running for a brand in the £200m region and hints it could soon be bidding for deals up to £500m. “We’re starting to see opportunities so if it makes sense and the value is there…” He adds that Lornamead will take over day-to-day management within three months and the supply chain within six. “And we pay cash.” In contrast, the VCs may pay “a bit more”, but will also demand longer transition times.
Helping Lornamead fund bigger deals was the launch on the London Stock Exchange in December last year of its EPIC Brand Investments fund that was created to co-invest in deals with Lornamead. It raised £50m, but with additional debt funding it has an “immediate firepower” of £150m.
With investors in the fund including HSBC, Merrill Lynch and UBS, Jatania says it could grow much larger than £150m. He says these institutions are keen to inject further funds, and there is also the option of issuing bonds. This extra firepower will also enable the company to look at portfolios of brands, which are increasingly being offloaded by multinationals that choose to focus on specific categories. Jatania cites the $400m portfolio of brands that Unilever put up for sale in the US as evidence.
Lornamead is appointing an investment bank to provide deeper links into the managements of the major multinationals. “This signifies a step change in the size of acquisitions we’re going for as these banks don’t get involved unless the deals are for hundreds of millions,” says Jatania.
The shop for brands has just begun. As operators like Lornamead engage in the consolidation of home and personal care brands, it is inevitable that they too will have orphan brands. Smaller brand operators will buy them. So the cycle continues.
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