Private Equity News & Analysis

Barclays Private Equity leads cosmetics MBO

Deal worth £47m enables manufacturing outsource business to buy itself out of South African VC and expand its UK business.

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Barclays Private Equity (BPE) has led a £47m management buy-out of Creative Outsourcing Solutions International (COSi) from South African VC, Rand Merchant Bank. The deal has also enabled COSi to expand its business with the purchase of cosmetic giant Revlon's European manufacturing operations in Wales.

BPE has taken what it describes as “a substantial minority shareholding” in return for its investment. Additional funding for the deal is from Barclays Leveraged Finance.

COSi's business model is to buy the production factories of brand name cosmetic and healthcare companies that are looking to focus more on marketing and less on manufacturing.

The company then takes over production and supplies goods to the multinational’s list of clients. This latest purchase will add around 3000 of Revlon’s core brand products and an eight-year outsourcing deal to COSi's model.

The deal is the first BPE has made in the manufacturing sector. Typically the group focuses on healthcare and support services companies. In January 2000, the group invested in UK-based Edotech, a company offering document production services.

Owen Clarke, director at BPE and COSi board member, said the investment was sound because high-level outsourcing is a continuing trend regardless of market conditions. “Indeed in tough market conditions companies look to be more efficient and a good outsourcing service can benefit from that,” he said.

With BPE's backing, COSi will now start to look aggressively for similar opportunities, said Michael ten Hope, managing director and founder of COSi. “We have entered into the next phase of our development and will look to widen our client base in the near future by entering more of these partnerships,” he said.

Founded in South Africa in 1992, COSi first made its European debut in 1998 with the acquisition of the Body Shop’s manufacturing facilities. The business has since moved its international headquarters to the UK and today outsources for a number of large brands including Unilever, Sara Lee and SC Johnson.