Private equity's new target industry: Sex toys
The growth of adult novelties is starting to turn heads in private equity.
Diamond Products, a portfolio company of New York's Brookstone Partners, has acquired high-end sex toy manufacturer Jimmyjane. The companies did not disclose the amount of the all-cash deal.
The purchase is Brookstone's second venture in the category in the past year. In September, the firm invested in Pipedream, with a product catalog of more than 3,000 items, including the "Fetish Fantasy Series," which has seen substantial growth over the past two years.
(Brookstone and Pipedream created Diamond Products as an umbrella for future investments, with Pipedream CEO Nick Orlandino heading the company.)
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The interest of an equity firm such as Brookstone highlights the sex toy market's growing strength. Though vibrators and other accoutrement were largely considered outliers as recently as five years ago, the category has entered the mainstream.
Toys have been a growth segment in the adult industry for several years now, with sales topping $15 billion. Part of that growth has been driven by high-end items from companies like Jimmyjane, whose products retail for $100 and up.
Retailers have been increasingly open to stocking the merchandise, as well.
Church & Dwight, owner of Trojan Condoms, has led the charge into mass market retailers like Wal-Mart and drug store chains like CVS, while specialty companies have been finding shelf space at more upscale stores.
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Jimmyjane has had long-standing deals with several stores, including Nordstrom, Sephora and Fred Segal.
"Jimmyjane is an exceptionally rare brand," said Orlandino. "I am very pleased that [founder] Ethan [Imboden] and the Jimmyjane team believe that our group is best able to ensure the continuity of this vision and the ongoing growth of the brand."
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Brookstone started the conversation, he said, and the growth potential it presented was too appealing to refuse. Diamond's products are sold through 5,000 retailers in more than 80 countries, according to its Brookstone Partners page.
"What this means for Jimmyjane as a company and brand is a very large platform for growth," Imboden said. "For Jimmyjane consumers and fans, this means more of the quality, design and innovation that they've come to associate with the brand and the team behind it."
How big is that consumer and fan base?
A study from Indiana University's Center for Sexual Health Promotion found that half of Americans have used a vibrator, and 94 percent agree that a vibrator makes it easier for women to reach orgasm.
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Such numbers are encouraging to both investors and manufacturers, and the increased interest in luxury toys like those from Jimmyjane points at continued revenue growth in the category.
Steve Thomson, global marketing manager for Lelo, another high-end sex toymanufacturer, said, "We recall how lingerie was perceived in the '70s, and look at how prevalent that is today."
—By Chris Morris, Special to CNBC.com