The Carlyle Group’s investment in Vogue International, a hair, bath and body product company, defied several private equity clichés.
Between the minority investment in February 2014 out of its $13 billion Carlyle Partners VI fund and Carlyle’s exit through a sale to Johnson & Johnson in July 2016, the firm increased the number of employees at the company by more than 50 percent to over 130.
It significantly grew EBITDA by boosting revenue and not just by cutting costs. It also enhanced Vogue’s sustainability efforts through the increased use of healthy ingredients in its products and greener packaging.
Vogue was founded in 1987 by chief executive Todd Christopher, a Clearwater, Florida, entrepreneur and the fourth generation in a family of hairdressers. According to a Moody’s Investors Service report from May 2014, Vogue used the net proceeds from a $415 million term loan at the time to fund a $400 million distribution to Christopher, while concurrently, Carlyle purchased 49 percent of Vogue’s equity from the founder for about $391 million.
Christopher and Carlyle sold the company for $3.3 billion just over two years later.
“They made a lot of change happen in under 30 months, with new positions, new brands and migration to a direct sales model to raise margins,” says Michael McKenna, a managing director at Alvarez & Marsal’s private equity performance improvement group and a judge. “They drove rapid improvement to maximise the IRR.”
Indeed, not only did Carlyle recruit management team members at top levels, but these additions were mostly newly created positions such as a chief financial officer, a chief marketing officer, an executive vice-president of sales and a vice president of IT.
Carlyle also introduced two new hair care brands, Proganix in 2014 and Maui Moisture in 2016, and overall increased the company’s market share in the US shampoo and conditioner market from 3.6 percent in 2013 to 6.3 percent in 2016.
In the UK and Australia, Carlyle helped the company migrate from a distributor-based sales model to a direct sales model, allowing Vogue to capture higher margins, while the company also launched into new markets, France and Germany, in 2015.
Carlyle made great use of its network of portfolio companies to the benefit of Vogue, facilitating the execution of a broker agreement with Acosta, a sales and marketing agency that provides outsourced sales, retail merchandising and marketing services to consumer packaged goods companies and other consumer-focused companies in North America.
“I like how Carlyle leveraged other portfolio companies to help Vogue’s sales,” said Joncarlo Mark, the founder of Upwelling Capital Group, a firm providing advisory services to institutional private equity investors and also a judge.
Vogue was clearly a win for Carlyle and for managing director Sandra Horbach and her consumer and retail team.
“It has been a privilege to partner with Todd and to support his efforts to develop and launch innovative products, strengthen and grow the organisation, advance sustainability practices, and reach new customers all around the world with the OGX brand,” she said when the sale to Johnson & Johnson was announced. Horbach has since been promoted to co-head of US buyouts.
Large-cap: The Carlyle Group – Vogue International
Upper mid-market: Cerberus Capital Management – Bowlmor AMF
Lower mid-market: Francisco Partners – Paymetric
Small-cap: The Riverside Company – YourMembership
Upper mid-market: ShawKwei & Partners – YongLe Tape
Lower mid-market: Advantage Partners – Hisense Broadband Multimedia Technologies*
Small-cap: Mekong Capital – Mobile World
*Hisense is not included in the write-ups due to confidentiality issues