Target Information

MPS International is the leading contract manufacturer of white label cosmetics in Poland. The company offers partners comprehensive services, which range from the initial ideation of new formulas to product testing in its own laboratories, as well as essential documentation and packaging design. MPS International produces a variety of cosmetics, including body, face, and hair care products, perfumes, and special sets.

Since Avallon MBO Fund II acquired MPS International in August 2014 as part of a management buyout (MBO), the company has experienced significant growth. Over the investment period, revenues increased by 67%, and operational profit (EBITDA) surged by 87% compared to 2020. Additionally, the workforce expanded from 234 to approximately 340 employees, reflecting a growth of around 45% since the fund's investment began.

Industry Overview in Poland

The cosmetics industry in Poland has seen rapid growth over the past decade, driven by an increasing demand for personal care products both domestically and internationally. The trend towards premium and niche cosmetic products, combined with a growing focus on sustainability, is reshaping the landscape of the industry. Poland's strategic location within Europe offers a substantial advantage for export-oriented companies like MPS International.

Furthermore, the rise of e-commerce has facilitated consumer access to international brands and products, leading to heightened competition among manufacturers. Local companies are adopting more innovative approaches to product development and customer engagement, thereby enhancing their market position. This evolving market dynamics call for adaptability and innovation, which MPS International has embraced throughout its operational expansion.

Recent government initiatives aimed at supporting domestic manufacturers, especially in the cosmetics and personal care sectors, have also contributed positively to the industry. Increased investments in R&D infrastructure and heightened consumer awareness about cosmetic products further bolster the industry's growth trajectory, paving the way for new opportunities.

As sustainability occupies a more prominent role in consumer decisions, companies are increasingly prioritizing the development of eco-friendly products and packaging solutions. This shift is crucial for manufacturers to remain competitive, and MPS International’s recent investment in expanding its R&D capabilities illustrates an understanding of this pressing market demand.

Rationale Behind the Deal

The sale of the majority stake in MPS International by Avallon MBO Fund II signifies a strategic exit after successfully enhancing the company's performance and operational capabilities. The focus on expanding product offerings and increasing sales volume aligned with the investment goals set at the time of acquisition. This achievement underscores the fund's commitment to driving substantial growth and providing strategic support to the company's management.

The heightened focus on international markets has proven beneficial, with exports now constituting a larger portion of MPS International's revenue. The investment also allowed Avallon MBO Fund II to acquire invaluable experience in the cosmetics sector, a knowledge base the firm intends to leverage in its subsequent fund, Avallon MBO III.

Investor Information

Avallon is a prominent private equity fund based in Poland, specializing in management buyouts and growth equity investments. With a strong track record of investing in diverse industries, Avallon employs a hands-on approach to foster growth within its portfolio companies. The fund is committed to supporting management teams in executing successful business strategies that drive profitability and expansion.

Currently, Avallon MBO Fund II is in the process of exiting investments in six companies across various sectors, including food, marketing, and polymer processing. Moreover, the firm has raised €137.1 million for Avallon MBO III, signaling an active pursuit of new investment opportunities across sectors such as IT and e-commerce.

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This investment exit was a well-timed move by Avallon, capitalizing on MPS International's robust growth and market positioning. The significant increase in both revenue and EBITDA during the investment period illustrates successful strategic initiatives and operational improvements within MPS. Such outcomes strongly validate the management buyout approach undertaken by Avallon.

As the cosmetics industry in Poland continues to thrive, MPS International's commitment to innovation and exports positions it well for future growth. The company's strategic direction, coupled with an expanding product portfolio, suggests a promising outlook, making it a valuable asset for potential investors.

Furthermore, Avallon's ability to extract substantial value from its investment while equipping itself with industry knowledge presents an advantageous cycle for future dealings, reinforcing their expertise in the sector. This experience could lead to further successful investments as they target emerging opportunities in related fields.

In conclusion, Avallon's exit from MPS International is seen as a successful investment that not only yielded significant returns but also set the groundwork for continued growth in the cosmetics market—indicating a commendable investment decision that fulfilled its objectives.

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