Female-backed SPAC, Powered Brands, aims to create new beauty conglomerate after public listing
- A special purpose acquisition company, or SPAC, called Powered Brands priced earlier this month, with the goal of creating a global conglomerate made up of sustainable and digitally focused beauty brands.
- It is one of very few SPACS to be founded and funded by women.
- Powered Brands says it's aiming to acquire between $800 million and $1.5 billion worth of assets.
The SPAC craze rippling across Wall Street has largely left out women. But one group of female founders and investors is looking to change that.
A special purpose acquisition company, or SPAC, called Powered Brands priced earlier this month on the Nasdaq, under the ticker "POWRU," with the goal of creating a new kind of global conglomerate made up of sustainable and digitally focused beauty brands.
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Powered Brands was founded by serial entrepreneur Katherine Power, who has launched a number of beauty and wine brands, and Dana Settle, founding partner at venture capital firm Greycroft.
Its bench of female executives and investors makes it one of the very few SPACS to be founded and funded by women. Power also currently serves as chief executive of Clique Brands, a global media and consumer brands company that she co-founded in 2007, which owns among other things the trendy fashion site for women called Who What Wear.
Following a successful public debut, Powered Brands says it's aiming to acquire between $800 million and $1.5 billion worth of assets. By reimagining what a global beauty conglomerate can be, it will compete with some of the biggest, including Estee Lauder, L'Oreal, Shiseido and Coty. The beauty business has been heating up on the heels of Target and Kohl's striking long-term partnerships with makeup sellers Ulta and LVMH-owned Sephora, respectively.
The U.S. prestige beauty industry generated $18.8 billion in sales during 2019, according to market researcher The NPD Group.
"We really feel like the SPAC is the perfect vehicle for this," Power, who is Powered Brands CEO and director, said in an interview. "Historically, there haven't been a lot of beauty companies that have gone public or have chosen to take that path. And it's typically because they get bought up by a strategic before that happens."
"There haven't been a lot of great examples, but I think you're going to start to see that changing because, ultimately, these businesses really make great public companies," she said.
SPACs have recently surged in popularity, across many industries, capturing the attention and involvement from high-profile investors including hedge fund manager Bill Ackman. Also referred to as "blank-check companies," SPACs are not a new acquisition vehicle. They've been around for decades, playing a much smaller role in the investing landscape. But they became mainstream in 2020, in large part due to the uncertainty brought on by the Covid pandemic.
In 2020, while there were 194 traditional IPO deals raising $67 billion — the best year since 2014, according to Renaissance Capital — it was an even better year for SPACs, 200 of which raised about $64 billion. Already this year, there have been as many SPACs as there were in all of 2019.
SPACs are companies with no commercial operations that are established solely to raise capital from investors for the purpose of acquiring one or more operating businesses. Investors in SPACs can range from well-known private equity funds to the general public. SPACs have two years to complete an acquisition, or they must then return their funds to investors.
Powered Brands said in its initial filing with the SEC last year that it was setting out to raise $200 million, but ended up with more than $1.5 billion in orders by the end of its first pricing day, according to Power.
"That showed us the opportunity for this industry, and that the vision was so compelling to the market that people were willing to step up," she said.
Greycroft's Settle, who serves as Powered Brands' chairperson, said the SPAC will look to invest in beauty, wellness and personal-care brands. It has not yet publicly disclosed any deals.
"Anything in a large addressable market that's growing quickly; that has native digital expertise built into their DNA," she said. "We're looking for clean ingredients and some level of sustainability. We're looking for businesses that are built around diversity, inclusion and transparency."
Some of Settle's successful exits at Greycroft include the 2019 IPO of The RealReal and the sale of Trunk Club to Nordstrom. She also currently serves on the board of directors of Imax.
Credit Suisse is the sole bookrunner on this SPAC deal.
The recent SPAC explosion hasn't come without some scrutiny, however. As more blank-check companies raise money and seek deals, their sponsors may find themselves under heightened pressure to "differentiate their approaches and demonstrate returns," McKinsey said in a recent analysis of the SPAC market.
Former Goldman Sachs CEO Lloyd Blankfein also recently on CNBC cautioned investors that the SPAC process circumvents the rigorous due diligence of the normal IPO process.
But some of Powered Brands' investors see the SPAC's strategy to buy up multiple brands as an advantage.
"A lot of other SPACs are focused on being one product companies, with a multi-SPAC approach," said Mike Kuchmek at Schonfeld Strategic Management, also an investor in Powered Brands. "The next generation is much more focused on sustainable products and the Powered Brands team cared about ESG long before it was en vogue ... and consumers are attracted to authenticity, not a large multinational trying to 'buy ESG.'"
SPAC's advisory board includes Karen Cate, currently chief financial officer and head of operations at online grocer Thrive Market; Kimberly Paige, current chief marketing officer for BET Network; and Brianna Mobrem, current president and CFO at Clique Brands.
Together, these women hope to get their hands on what they say is a $2 trillion global health and wellness market, and beauty and personal-care industries valued at more than $500 billion, citing industry analysts' estimates.
"There's a certain democratization of beauty that's happening through distribution [channels] like Target — being able to walk in anywhere you shop and pick something up that might otherwise be considered prestige or luxury," said Power, who also founded and leads the skin-care brand Versed and the beauty brand Merit. "The brands that understand that and can adapt to that are going to do really well."