The New York City–based private investment firm is poised to update Avon’s business model. "Having now spent months with the company, its management team, its Representatives and its Associates, we are even more enthusiastic about investing in the North American Representatives and business, says Steven F. Mayer, senior managing director and co-head of global private equity for Cerberus.
He goes on to explain that “our goal is to make the direct-selling model and the Representative experience more contemporary, efficient, and profitable by reinvigorating the Avon brand, improving New Avon LLC's competitiveness, and positioning it for long-term, sustainable growth."
Direct sales works well in emerging markets and forecasters believe it will again be a key part of the retail landscape in the US too. "We are strong believers in the power of the Avon brand and the direct-selling business model, and are confident we can be a catalyst for improvement in both North American and the international markets,” Mayer notes in his comment about the deal to press.
Numbers
Cosmetics Design first reported on the deal when it was announced in mid-December of 2015.
The deal stipulates that Cerberus will invest $435m, for a roughly 17% share, in Avon proper. And Cerberus is investing $170m in the now private North American business. That amount equates to 80% ownership of the New Avon LLC. The remaining 20% of the North American business stays with Avon.
The company’s CEO is confident that the deal will mean recovery of Avon: "Our strategic partnership with Cerberus sets Avon on a solid path to profitability and growth by providing a solution for the North America business as well as capital, focus, and resources to support Avon Products, Inc. in the execution of our transformation plan," says Sheri McCoy, chief executive officer of Avon.
Changing of the board
Under the new ownership, board leadership is changing. Douglas Conant, Paula Stern, V. Ann Hailey, Maria Elena Lagomasino, Sara Mathew, and Gary Rodkin are all stepping down.
The new board comprises Chan Galbato as non-executive Chairman, W. Don Cornwell as lead independent Director, Sheri McCoy, Nancy Killefer, Susan Kropf, Steven Mayer, Helen McCluskey, Charles Noski, and Michael Sanford, as well as two independent directors which Avon and Cerberus will select jointly.
"I'm honored to be a part of the team that is creating Avon's future," says Galbato, chief executive officer of Cerberus' affiliate Cerberus Operations and Advisory Company. "This will be an exciting time for Avon and all of its stakeholders as the company begins to realize its full potential and continues to grow its business in markets around the world."