Beauty CareM&A REPORT

2013

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2012 M&A Overview A Lot of Talk, Not Much Action

Steve Davis, Managing Director

2012 started o with the promise of a stellar year for mergers andacquisi3ons in the beauty care industry. Ar3cles 3tled BeautyPromises Strong M&A Outlook and Beauty M&A Heats Up scrolledacross the headlines of the trade journals while rumors of mul3plehigh prole deals circulated around the water cooler. In addi3on,strategic buyers were ush with cash; substan3al and expiring cashoverhangs were driving strong private equity demand; and lowinterest rates and demand for loan volume were suppor3ngincreasingly aggressive debt markets. Furthermore, the expira3on ofthe Bush era tax cuts seemed des3ned to drive huge M&A volume asbusiness owners looked to lock in lower capital gains rates in 2012.

2012 willperhapsbe betterrememberedfor the dealsthat did nothappen thanfor completedtransacons.

But alas, such M&A activity never fullymaterialized in 2012. In fact, merger andacquisi3on ac3vity in the beauty care sector tooka step back. In 2012, we tracked 92 announcedtransac3ons in the beauty care sector, down 4%from 2011 and the median size of announcedtransactions declined from $50 million to $31million over the same period. In addition, therewas a void of any large deals in 2012 with themost notable and one of the largest transac3onsof the year LOrals acquisition of Urban Decay occurring in November.

2012 will perhaps be better remembered for thedeals that did not happen than for completedtransac3ons. According to industry insiders, anumber of high prole beauty care companieswere rumored to have engaged advisors andbeen in the market, including tarte cosme3cs (apor2olio company of Encore Consumer Capital);Yes To (a por2olio company of San FranciscoEquity Partners); StriVectin (a portfolio companyof Catterton Partners); several beauty care assetsowned by TSG Consumer Partners L.L.C.; and TheColomer Group none of which crossed the nishline in 2012.

While each M&A transaction has its own storyand timeline, the decline in deals can bea4ributed in large part to buyer condence asacquirors remain cau3ous in what is s3ll arelatively weak consumer environment in theU.S. and in Europe; buyer motivation as strategicacquirors continue to be highly focused on add-ons that ll in the white space in their brandpor2olios; and perhaps most importantly sellermo3va3on as owners remain willing to hold outfor premium strategic valuations particularly ifthe underlying asset is performing well. This hasresulted in a number of sellers waiting on thesideline until truly strategic deals with premiumvaluations emerge. In fact, Urban Decay hadbeen the subject of the rumor mill for over ayear before it finally sold to LOral in Novemberof 2012 for an estimated $350 million.

Private Equity GroupsHold Their OwnPrivate equity groups con3nued their inroads intothe beauty care sector in 2012. Private equityac3vity in 2012 comprised some new faces to thebeauty care sector (such as Star Avenue Capitalwith its investment in Macadamia Natural Oil andTengram Capital Partners with its investments inLaura Geller Beauty and NEST Fragrances) and ahandful of groups that con3nued to build on totheir exis3ng beauty care por2olios most notablyNorth Castle Partners with its acquisi3on ofPalladio Beauty Group, TPR Holdings LLC with theacquisi3on of CARGO Cosme3cs and BrynwoodPartners with the acquisitions of the rights toWhite Rain, L.A. Looks, Dep Sport, Soft &Dri female deodorant brand, the Pure &Natural liquid hand soap and body wash brandand the Coast personal cleansing brand.

Outlook for 2013Despite the less than inspiring year-end sta3s3cs,we con3nue to see strong demand in the beautyand personal care industry and believe 2013 willrepresent an active M&A market for thesesectors. On the strategic acquiror front, M&Aac3vity will be driven by buyers seeking answersto the morphing retail and distribu3on landscape par3cularly in an a4empt to capture the rapidlyexpanding direct to consumer and social media

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driven channels of commerce; companies copingwith changing consumer demographic andpurchasing trends; acquirors a4emp3ng to gainaccess to high-growth and addi3ve productcategories such as an3-aging skin care; and theever-present pursuit of complementary brands,product categories and geographies. In addi3on,corpora3ons are si5ng on significant cashreserves and are actively seeking ways to growin a continued slow economic environment. Asevidence, the seven pubic companies in theIntrepid Beauty Care Index (see page 11) heldover $8.2 billion in cash and other liquid assets asof December 31, 2012.

On the private equity front, nancial sponsorshave over $1 trillion of dry powder of whichalmost $200 billion is from expiring funds raised in2007 and 2008 according to The New York Times.Combined with low interest rates, a4rac3vedebt markets and a strong interest in brandedconsumer products, private equity groups willcon3nue to be aggressive acquirors in thebeauty care sector in 2013. Furthermore, recentinvestments and high prole successes in thesector (such as Castanea Partners realiza3on onUrban Decay) will drive further investmentappe3te from both consumer focused fundsand the broader pool of private equity capital.M&A ac3vity will also be driven by a growingbacklog of brands on the market or rumored to befor sale, including several beauty care deals weare taking to market in 2013.

For information on Intrepids M&A expertisein the Beauty & Personal Care sector, pleasecontact Steve Davis at sdavis@intrepidib.comor 310.478.9000.

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Steve Davis

Managing DirectorHead of the Beauty & Personal Care PracticeIntrepid Investment Bankers

M&A activity willalso be driven bya growing backlogof brands on themarket or rumoredto be for sale,including severalbeauty care dealswe are taking tomarket in 2013.

Beauty & Personal CareSelect M&A Transaction Experience

*Represents transactions executed by principals of Intrepid while at prior firms.

has been acquired by

owners of

We ini3ated this transac3on,assisted in the nego3a3ons

and served as nancial advisor toAlterna Professional Haircare Company.*

has received an investment from

We ini3ated this transac3on,assisted in the nego3a3ons

and served as nancial advisorto Too Faced Cosme3cs, Inc.*

Golden Sun, Inc.

has been acquired by

We ini3ated this transac3on,assisted in the nego3a3ons

and served as nancial advisorto Golden Sun, Inc.*

has been acquired by

We ini3ated this transac3on,assisted in the nego3a3ons

and served as nancial advisorto Allegro Mgf., Inc.*

subsidiaries of

has been acquired by

We ini3ated this transac3on,assisted in the nego3a3ons

and served as nancial advisor toOpal Concepts, Inc. and its subsidiaries.*

and its aliates,subsidiaries of

have been acquired by

CHEVEUX ACQUISITION, LLC

We ini3ated this transac3on,assisted in the nego3a3ons

and served as nancial advisor toOpal Concepts, Inc. and its subsidiaries.*

Joico Laboratories Inc.and its subsidiaries

have been acquired by

Zotos Interna3onal, Inc.A subsidiary of Shiseido Co., Ltd.

We ini3ated this transac3on,assisted in the nego3a3ons

and served as nancial advisorto Joico Laboratories, Inc.*

Con3nental Fragrances, Ltd.d/b/a Salon Grax

has been recapitalized by

We ini3ated this transac3on,assisted in the nego3a3ons

and served as nancial advisorto Salon Grax.*

5

a por2olio company of

has been acquired by

We ini3ated this transac3on,assisted in the nego3a3ons

and served as nancial advisorto PureOlogy Research, LLC.*

What beauty care trends are you seeing inthe market?

LM: One of the most striking trends we are seeingis an increasing segmenta3on in the beauty caresector across many dimensions, including purposeof the product, price point, distribu3on channelsand demographic prole of the consumer. Someof the most interes3ng recent acquisi3onopportuni3es we have seen are niche marketleaders who have built great products eec3velytarge3ng one of these dimensions such as amarket leader in ethnic products where there areunique physiological dierences in hair and skinor a company that has gured out a way to deliverbe4er value through more eec3ve formula3onsourcing or use of ingredients. Such companiescan capture share of the consumer wallet byvirtue of crea3ng a truly unique value proposi3onor addressing a unique consumer need.

We did some consumer research around ourlatest investment, Palladio, which is an herbal andvitamin enriched color cosme3cs brand with retailprice points ranging from $2 to $10. What wefound was that our consumer spends her moneyon Palladio daily but also aspires to have a MACor Urban Decay product in her bag. Within thatone example you can see that even within aconsumers wallet there is a segmentation ofoccasion whether it is by price point, by colorassortment or by usage applica3on.

How is such market segmenta'on drivingyour investment decisions?

LM: I think the most important way to play as aninvestor in the beauty care market is byidentifying or creating products or articulating avalue proposi3on around one of these marketdimensions. We look for brands that oer adened group of consumers something dierentthan what those consumers are currently able toget at the price point they are willing to spend andin the channels they are tracking. We do notwant to swim upstream by trying to driveconsumers to dierent channels than theircurrent consumer shopping pa4erns are takingthem. Within that landscape, we look for pocketsof opportunities where we can take small butdifferentiated beauty care brands and help themgrow big enough for logical strategic buyers towant to own them.

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One-on-One with LouMarinaccioNorth Castle Partners is the leading private equity firm focused on the Health, Wellness andActive Living markets.

Since inception in 1997, North Castle has invested in over 50 Healthy Living companiestotaling over $2 billion in enterprise value, including some of the most well-known brands intheir sectors: Nutri'on (Naked Juice, Mountain Sun, Walnut Acres, Bora-Bora, FlatOutFlatbreads), Beauty & Personal Care (Avalon Organics, Doctors Dermatologic Formula, RedDoor Spas, gloProfessional, Mineral Fusion, Palladio Beauty Group), Fitness, Recrea'on &Sports (Equinox Fitness, World Health Clubs, Curves, Octane Fitness, Performance Bicycle,Cascade Lacrosse), Home & Leisure (Grand Expedi3ons), and Consumer Healthcare (Enzyma3cTherapy, CRC Healthcare, Leiner Health Products).

Lou Marinaccio, Managing Director,North Castle Partners, has over20 years of experience investing in,advising, and operating consumerand middle-market companies,including 14 years at North Castle.

What issues do you struggle with as aninvestor in the beauty care sector?

LM: There was a moment in 3me when beautywas the focal point of department stores,pres3ge retailers, and drug stores. Over the last15 to 20 years, the industry has migrated to asmany as 15 channels, as beauty care companiespursue alterna3ve forms of distribu3on such ase-commerce, new emerging retail concepts and abroad array of direct-to-consumer pla2orms. In ana4empt to protect the a4en3on of the consumer,key retail and distribu3on leaders in each of thesedistribution channels have emerged, focused onbecoming preferred distribu3on partners forselect brands within their channel.

For beauty care manufacturers, the issue thenbecomes how to navigate the pros and cons offocused distribu3on (in other words, partneringwith one of the channel leaders) versus broaddistribution. The pro of focused distribution istrue partnership with a leading retailer whichcould entail more promo3onal ac3vity, preferredshelf placement, a greater ability to sell in newproducts and typically higher growth. The con iscustomer concentra3on. Beauty care investorsmust assess how either strategy impactsenterprise value over the long term.

At North Castle, we con3nue to look for ways toleverage the power of the focused retailerpartnership model without constraining long termgrowth or value. Poten3al strategies includeinterna3onal expansion, the crea3on of siblingbrands and add-on acquisitions. Historically wehave been reluctant to make add-on acquisi3onsin the beauty care sector since single focusedbrands are more easily acquired and integratedby strategic buyers. However, given themorphing distribution channels and emergenceof channel leaders, we are more open today tocrea3ng redundancy and business resilience byhaving mul3ple brands under the same roof thatoer a similar value proposi3on to dierent non-conic3ng channels.

What are your current acquisi'on criteria inthe beauty care industry?

LM: We look at a mix of nancial and opera3ngcriteria. With regards to operating criteria, werst look at the product and brand does it havea truly unique value proposi3on, does it deliverreal ecacy to the consumer and does the brandhave a proven reason to exist? Next we want tounderstand market size how big is theconsumer demand space? Finally, what does thecompany need to achieve and how can NorthCastle leverage its successful investment historyand resources to add value? On the financialside, we look for at least $10 million in revenueand a gross margin that can support anappropriate marke3ng spend for the channel. Weare less focused on EBITDA as ul3mately scaledrives earnings in the beauty care sector.

How has private equity eec'vely competedagainst strategic buyers in the beautycare sector?

LM: Beauty care companies are fundamentallyvery interes3ng investments for private equitygroups. When done correctly, beauty carecompanies can offer both strong cash flow andthe opportunity to create significant valuethrough multiple expansion in a sale to astrategic buyer. This dynamic allows privateequity groups that understand how to buildbeauty care brands to be aggressive bidders forattractive properties. Strategic buyers on theother hand tend to operate on a pendulumwhereby one day acquisi3ons represent a cri3calsource of innova3on and thus strategic buyers willaggressively pursue middle market beauty carebrands (and thus be more competitive withprivate equity investment). The next day thesesame strategic buyers will only pursuebusinesses that will have an immediate andmaterial impact on their results and thus willonly focus on very large opportunities. It isunclear where we are in that pendulum arc, butmy hunch is that the market is currently swingingtowards strategic buyer demand for largeracquisi3ons.

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tegraTtegraTroriuqcAetaD Business Descripon

DealSize

($mm)

27-Dec-12 Yellow Wood Partners Ilex Consumer Products Group, Inc. Health, bath and beauty products -

19-Dec-12 Tengram Capital Partners, LLC Laura Geller Make-up Studios, Ltd. Pres ge color cosme cs -

12-Dec-12 Markwins Interna onal Corpora on Physicians Formula Holdings Inc. Mass market cosme c and skin care products $75

9-Dec-12 Palamon Capital Partners TheBigWebsite Ltd. dba feelunique.com Online beauty retailer $42

4-Dec-12 Bertram Capital Management LLC Paula's Choice Inc.Skin care and cosme c products ande-commerce pla!orm

-

26-Nov-12 LOral SA (ENXTPA:OR) Urban Decay Cosme cs, LLC Pres ge cosme cs and related beauty products -

15-Nov-12 Allergan Inc. (NYSE:AGN) SkinMedica, Inc.Dermatological skin care products tophysician channel

$375

21-Sep-12 Tengram Capital Partners, LLC NEST Fragrances, yruxuLCLL fragrances and personal care products -

13-Sep-12 Birchbox, Inc. BeautyCom SAS dba JolieBox Online beauty company in France -

12-Sep-12 Star Avenue Capital, LLC Macadamia Natural Oil, LLC Professional hair care products -

5-Sep-12 Yellow Wood Partners Parfums de Coeur, ssaM.dtL market fragrances -

16-Aug-12 Yves Rocher SAKosan Kozme k Pazarlama Ve Ticaret A.S. dbaFlormar

Color cosme c and personal care products in Turkey -

24-Jul-12Wipro Consumer Care andLigh ng Ltd.

Woods of Windsor and Yardley of London Natural bath, body and home care products -

9-Jul-12 TPR Holdings LLC CARGO Cosme cs Corp. Color cosme cs and related accessories -

6-Jul-12L'Occitane Interna onal S.A.(SEHK:973)

Symbiose Cosme cs France S.A.S.Skin care products based on Koreanmedicinal science

-

2-Jul-12 Revlon, Inc. (NYSE:REV) Bari Cosme cs, Ltd., Certain Assets Skin and nail care 66$stcudorp

26-Jun-12High Ridge Brands Co.(Brynwood Partners)

White Rain, Adorn, The Dry Look, Mink and ToniBrands

Hair care and personal care products -

12-Jun-12Elizabeth Arden, Inc.(NasdaqGS:RDEN)

Give Back Brands secnargarFCLL and related beauty products $51

31-May-12Elizabeth Arden, Inc.(NasdaqGS:RDEN)

NewWave secnargarFsecnargarF and related beauty products $60

23-May-12Valeant Pharmaceu calsInterna onal, Inc. (TSX:VRX)

University Medical Pharmaceu cals Corp., CertainAssets

Dermatological skin care 501$stcudorp

26-Apr-12 LOral SA (ENXTPA:OR) Cadum Interna onal SA Personal care and baby care products in France $264

18-Apr-12 North Castle Partners, LLC Palladio Beauty Group, LLCHerbal and vitamin-enriched color cosme csand skin care products

-

18-Apr-12Perfumania Holdings, Inc.(NasdaqCM:PERF)

Parlux Fragrances, Inc. Pres ge fragrances and related beauty products $205

11-Apr-12 Source Capital, LLC Sun & Skin Care Research, Inc. Sunscreen and skin care related products -

1-Apr-12Golden Sun, Inc.(Brynwood Partners)

L.A. Looks and Dep ssaMsdnarB market hair styling products -

2-Mar-12 BHMS Investments Osmo cs ecneicSnoitaroproC -based an -aging skin care products -

27-Feb-12 Symrise AG (XTRA:SY1) Trilogy Fragrances larutaN.cnI and organic fragrances - x

10-Feb-12Freeman Beauty, LLC(Champlain Capital)

Delicious Brands LLC, Eclos & c. Booth Brands Cosme c and an -aging skin care products -

8-Feb-12LG Household and Health Care, Ltd.(KOSE:A051900)

Ginza Stefany Cosme cs Co., Ltd. Distributor of cosme cs and perfumes -

24-Jan-12 PZ Cussons plc (LSE:PZC) Fudge Hair Care lanoisseforPdnarB hair care 04$stcudorp

17-Jan-12 Weston Presidio Too Faced Cosme cs, Inc. Pres ge color cosme cs -

6-Jan-12 SkinMedica, lareniMecneicseroloC.cnI based color cosme cs and skin care products -

Figure 1 Select Historical Beauty Care Transac'ons - 2012

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Figure 3 Announced Beauty Care Transac'ons Worldwide

84

113

9994 94 96 92

0

25

50

75

100

125

2006 2007 2008 2009 2010 2011 2012

Figure 2 Stock Performance Chart

Beauty Care Market Statistics

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6.0x

8.0x

10.0x

12.0x

14.0x

Average: 10.1x

Figure 5 Enterprise Value/EBITDA of Beauty Care Index

Figure 4 Enterprise Value/Revenue of Beauty Care Index

Beauty Care Market Statistics (continued)

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11Figure 6 Public Company Analysis Beauty Care

BeautyCare

PublicCo

mpa

nyCo

mpa

rables

%of52

Enterprise

LastTw

elve

Months

($inmillions,exceptpersharedata)

WeekHigh

MarketCap.

Value

Revenue

GrossProfit

EBITDA

Avo

nProd

uctsInc.

88.2%

$8,985

$10,98

7$1

0,71

7$6

,548

$797

Beiersdo

rfAG

98.6%

$19,81

0$1

7,12

4$7

,971

$5,034

$1,200

Elizab

ethArden

,Inc.

76.4%

$1,111

$1,413

$1,317

$663

$154

TheEsteLaud

erCo

mpa

nies

Inc.

94.9%

$24,23

1$2

4,27

7$9

,982

$7,967

$1,812

InterPa

rfum

sInc.

99.7%

$710

$765

$666

$359

$91

L'OrealSA

97.9%

$90,21

8$8

8,10

5$3

0,22

6$2

1,36

2$5

,739

Revlon

,Inc.

98.9%

$1,068

$2,173

$1,426

$920

$274

Shiseido

Compa

ny,Lim

ited

79.6%

$5,035

$6,464

$7,252

$5,504

$631

EnterpriseValue

/LTM

PELastTw

elve

MonthsMargins

Revenue

EBITDA

Ra o

3-yearRevenueGrowth

Gross

EBITDA

Avo

nProd

uctsInc.

1.0x

13.8x

NM

1.6%

61.1%

7.4%

Beiersdo

rfAG

2.1x

14.3x

54.3x

0.8%

63.1%

15.1%

Elizab

ethArden

,Inc.

1.1x

9.2x

21.9x

7.0%

50.3%

11.7%

TheEsteLaud

erCo

mpa

nies

Inc.

2.4x

13.4x

26.7x

10.1%

79.8%

18.1%

InterPa

rfum

sInc.

1.1x

8.4x

20.0x

18.8%

53.9%

13.7%

L'OrealSA

2.9x

15.4x

23.6x

8.7%

70.7%

19.0%

Revlon

,Inc.

1.5x

7.9x

21.1x

3.2%

64.5%

19.2%

Shiseido

Compa

ny,Lim

ited

0.9x

10.2x

35.3x

2.1%

75.9%

8.7%

Mean

1.6x

11.6x

29.0x

6.6%

64.9%

14.1%

AdjustedMean*

1.6x

11.5x

25.7x

5.5%

64.9%

14.4%

*Adjustedmea

nexclud

esthehigh

esta

ndlowestv

alue

s.

About UsIntrepid Investment Bankers LLC, headquartered in Los Angeles, Calif., is a mergerand acquisition corporate finance advisory firm focused on the middle market.Intrepids services include transaction advisory, equity and debt capital raisingand providing strategic advice in complex securities situations. The firms clientsinclude entrepreneur and family-owned businesses, financial sponsors and majorcorpora3ons. Collec3vely, the senior banker team at Intrepid brings over 150 yearsof mergers and acquisitions advisory experience and has advised on over 350transactions spanning a broad range of industries including Consumer Products,Business Services, Financial Institutions, Food & Beverage, Healthcare and IndustrialProducts & Distribution. Intrepid Investment Bankers LLC augments its internationalcapabilities by partnering with M&A International Inc., an exclusive global allianceof independent middle market mergers and acquisitions advisory firms.www.intrepidib.com Member FINRA/SIPC.

Our Beauty & Personal Care PracticeUnique, dedicated focus on beauty and personal care clients in the middle market

Substan'al sell-side M&A experience across the beauty and personal care sector

Deep understanding of key trends and value-drivers across the industry

Strong rela'onships and ac've dialogue with key strategic acquirors and privateequity groups focused on the beauty and personal care sector

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STRATEGIC ADVISORY

CORPORATE FINANCE

The informa3on contained herein was prepared by representa3ves of Intrepid Investment Bankers LLC, a FINRA registered broker-dealer (Intrepid). Thisdocument and any other materials accompanying this document (collec3vely, the Materials) are provided for general informa3on purposes. By accep3ng theMaterials, the recipient thereof acknowledges and agrees to the ma4ers set forth below in this no3ce. Intrepid makes no representa3ons or warran3es, expressor implied, as to the accuracy, fairness or completeness of the informa3on in the Materials. Informa3on in the Materials is preliminary and is not intended tobe complete, and such informa3on is qualied in its en3rety. Any opinions or es3mates contained in the Materials represent the judgment of Intrepid at this3me, and are subject to change without no3ce. The Materials are not an oer to sell, or a solicita3on of an oer to buy, the securi3es or instruments named ordescribed herein. The Materials are not intended to provide, and must not be relied on for accoun3ng, legal, regulatory, tax, business, nancial or related adviceor investment recommenda3ons. No person providing any Materials is ac3ng as duciary of advisor with respect to the Materials. You must consult with yourown advisors as to the legal, regulatory, tax, business, nancial, investment and other aspects of the Materials. Sources: Capital IQ

R. Steven DavisManaging DirectorHead of the Beauty & Personal Care Prac!ce

Mobile: 310-871-4748sdavis@intrepidib.com

www.intrepidib.com

Intrepid Investment Bankers LLC11755 Wilshire Boulevard, Suite 2200Los Angeles, CA 90025

Phone: 310-478-9000Fax: 310-478-9004

Member FINRA/SIPC