Earlier this month, L’Oréal quietly offloaded Sanoflore, the natural skin care brand it acquired in 2006, to private equity firm Ekkio Capital, and stopped the commercialisation of Decléor, the essential-oil-based skincare line it purchased from Shiseido in 2014. The divestitures, while significant, got a fraction of the attention that the French conglomerate received when it splurged for Aesop in April. Unilever, meanwhile, hired investment banks Morgan Stanley and Evercore Inc in September to sell off its non-core beauty portfolio that includes Caress, TIGI, St. Ives and Q-Tips.

As competition in beauty has become more fierce, larger companies like L’Oréal, Unilever and Kao are moving from generalists to specialists in a quest to cut costs and follow stricter divisional mandates. While conglomerates often have plenty of cash on the balance sheet, there is no doubt that financial pressure is mounting. (Following a projected fifth year of profit slump, Kao, the Japanese owner of Bioré and Curél, has committed 60 billion yen, or approximately $400 million, to structural reforms, with the cosmetics business at the forefront.) Internal hurdles like staffing and resourcing can make sustaining a scattergun portfolio approach hard; specialising enables these organisations to make bigger, better bets.

“Historically, the focus was just, ‘We are a beauty company’,” said Marko Horvat, a managing director at investment bank Raymond James. “Focus has become a recent theme. There’s now a view that specialisation lets [strategics] extract more value, rather than a portfolio that’s a little of this and a little of that.”

Read the full story on why a more selective approach to M&A is underway. #linkinbio

✍️ @danielakmorosini
? Shutterstock