Korean cosmetics sector posts record M&A activity

As K-beauty gains popularity worldwide, domestic mergers and acquisitions in South Korea’s cosmetics sector have surpassed 3 trillion won this year. This marks the largest total in eight years and shows that transactions are expanding beyond brand-focused deals to include packaging, beauty medical devices and original design manufacturing, or ODM, for cosmetics.

According to MMP, a consulting firm specializing in mergers and acquisitions for small and medium-sized enterprises, the domestic cosmetics industry completed 21 deals from January to October this year, totaling 3.176 trillion won. This represents a 26.9 percent increase from last year’s 2.582 trillion won across 18 deals. It is the first time in eight years that the total has surpassed 3 trillion won, since 2017, when it reached 3.331 trillion won.

The most notable feature of this year’s cosmetics M&A activity is that the focus has shifted from brands to the broader beauty sector, including packaging materials, specialty ingredients, beauty medical devices and ODM. Analysts say companies are moving beyond strategies that focus solely on acquiring popular brands, aiming instead to secure the core capabilities of the K-beauty ecosystem in manufacturing, packaging and technology.

The largest deal this year was KKR’s acquisition of Samhwa. Global private equity firm Kohlberg Kravis Roberts purchased Samhwa for 733 billion won, setting a record for the highest price ever paid for a single item, packaging containers. Founded in 1977, Samhwa is Korea’s leading packaging company, supplying premium containers to major brands including Amorepacific and LG Household & Health Care.

Investment flows that combine brands with distribution platforms were also prominent. Seorin Company, owner of the basic skincare brand Round Lab, was sold to Gudai Global for 600 billion won. Gudai Global has rapidly built a global distribution portfolio by acquiring representative K-beauty indie brands such as Chosun Beauty and TIRTIR. The acquired brands generate more than 60 percent of their sales overseas. K-Beauty Holdings’ acquisition of The Face Shop subsidiary Myunghwa Factory for 190 billion won also drew attention. Myunghwa Factory maintains a top-selling position in the skincare category on Amazon in the United States.

Large transactions continued in the beauty medical device sector. VIG Partners acquired Bioal, which produces radio-frequency-based lifting devices including Celineu, Scarlet and Silfirm X, for 521.3 billion won. Bioal is one of the most widely used beauty medical device brands in domestic and international clinics and has gained recognition for its technological value amid growing exports of beauty medical equipment.

In the color cosmetics ODM sector, CNC International was sold to Ascent Equity Partners for 285 billion won. CNC International has grown as a leading ODM in “point makeup” products such as lip and eye cosmetics, securing global clients including L’Oréal and Estée Lauder Group.

Domestic cosmetics exports hit a record high of 10.2 billion dollars, or about 15 trillion won, last year, a 20.6 percent increase from the previous year. In the first half of this year, exports totaled 5.51 billion dollars, up 14.8 percent from the same period last year. The number of export destinations also expanded to 176 countries. As K-beauty continues to perform strongly in exports, global investors are increasingly participating in M&A deals.

“With exports increasing not only to Japan and the United States but also to Europe and the Middle East, the global momentum of K-beauty is only beginning," said Park Jong-dae, a researcher at Meritz Securities. "The value across the value chain, including ODM, packaging and distribution, is rising simultaneously.”


남혜정기자 namduck2@donga.com