PE Firms Turn Away Even as K-Beauty Companies Hit the Market

More Cosmetics Companies Hit the Market,
But Deals Remain Elusive
Concerns Rise Over Sky-High Valuations and the Risk of Buying at the Peak

As the global "K-beauty" craze continues to surge, the stock prices and valuations of related companies are soaring. In the mergers and acquisitions (M&A) market, there is a sentiment that expectations have become excessively high, making it difficult for deals to be finalized.

According to the financial investment industry on August 12, APR's stock closed at 226,000 won the previous day, marking a 352% increase since the beginning of the year. Its market capitalization is nearing 8.6 trillion won, surpassing Amorepacific (market cap: 7.4051 trillion won) to become the leading cosmetics stock. The company is benefiting directly from the K-beauty boom, showing overwhelming growth in major e-commerce markets such as the United States and Japan.

Along with the rise in stock prices, the valuations of cosmetics companies in the M&A market are also climbing sharply. A notable example is when domestic private equity fund (PEF) manager Ascent Equity Partners acquired C&C International this past May, applying a premium of about twice the market capitalization. At the time, the share price was in the 33,000 won range, but Ascent EP set the acquisition price at 69,900 won per share.

However, the rapid increase in stock prices and valuations is cooling the enthusiasm in the K-beauty M&A market. Currently, more than 10 companies?including Dewytree, Cosnine, and PNC Labs?are up for sale, but there has been no news of successful deals.

Recently, VIG Partners' acquisition of LG Chem's aesthetics division for 200 billion won is considered a special case. Although the filler manufacturing facilities were excluded from this sale, the deal was closed at less than half the originally discussed price (in the 500 billion won range). VIG Partners' acquisition strategy has received positive reviews.

An investment banking industry insider commented, "If you look only at the numbers, such as sales or EBITDA, the valuations and price tags being discussed for cosmetics companies are not entirely unreasonable. However, given the large number of companies coming to market, it could be interpreted that valuations have reached their peak." A representative from a major domestic PEF manager also said, "Recently, we have received multiple investment proposals from cosmetics companies of all sizes, but the prices are not attractive enough to even bring them to our internal investment review committee. In most cases, they are rejected at the working level," adding, "While we acknowledge the enthusiasm and growth potential of K-beauty, the current prices are indeed burdensome from a private equity fund's perspective."