Natura's Acquisition of Avon Products
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Case Code: BSTR591 Case Length: 13 Pages Period: 2018-19 Pub Date: 2019 Teaching Note: Available |
Price: Rs.300 Organization: Natura & Co. Industry: Cosmetics & Toiletries Countries: Brazil, United States Themes: Mergers and Acquisitions |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Avon Acquisition
For years, Avon had been struggling to keep pace with the changes in consumer tastes and habits, and also faced competition from online beauty companies. Though the company had pioneered the direct-selling modal in cosmetics supported by Avon Lady sellers, it continued losing market share to rivals such as Sephora, Estée Lauder Companies Inc., and L’Oréal. While the competitors managed to attract new younger customers, Avon failed to make itself relevant to younger customers, consistently losing ground to rapidly changing personal-care trends and start-ups. The company’s business suffered even in its biggest market, Brazil, where it made nearly a quarter of sales, due to a weak economy and stiff competition from Natura...
Advantages
After the announcement of the acquisition deal, Avon’s shares gained nearly 40% in value as investors expected the deal to increase Avon's operational efficiency and expand Natura's global footprint. Together, the new entity would be the fourth largest beauty company in the world, behind L'Oréal, Estée Lauder, and Shiseido. Natura said that "The combination created a group of excellence in cosmetics, multi-brand and multichannel, integrating 6.3 million consultants of Avon and Natura, 40 thousand employees, 3,200 stores and one growing digital strength, to bring beauty to more than 200 million consumers."...
The Road Ahead
After Natura entered premium retail stores with the purchase of Aesop and The Body Shop, the acquisition of Avon in direct sales created new avenues for the company’s core business of door-to-door distribution. The complicating factor of the merger plan was that Natura was listed on the Brazilian stock exchange, while Avon was listed on the NYSE. Both Natura and Avon faced shareholder pressure since Avon’s shareholders might not want to own something that traded in Brazil, some industry observers said...
Exhibits
Exhibit I:Principles Developed by McConnell
Exhibit II: Avon’s Consolidated Statement of Operations
Exhibit III: Salient Points of Avon Acquisition Deal
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