UNILEVER TO ACQUIRE DR SQUATCH
WHY BUY? VALUATION EST, & WHAT SUCCESS LOOKS LIKE - BONUS NEWSIE
Yesterday Unilever announced it will acquire menscare brand Dr. Squatch - the deal is presumably in excess of $2B
But why buy?
Well, Unilever’s personal care business has been struggling - & this is the perfect asset to plug the gap
Let's unpack the rationale from Unilever 👇
You can listen to my breakdown here if you prefer
Unilever's Struggles
Unilever by all accounts has gotten its butt kicked by P&G over the last 5 years. UL stock is up 11%, while PG stock is up almost 40%
Uncoincidentally, P&G's revenue has grown +26% since 2018, while Unilever's grown just 19%
Unilever's personal care portfolio has not grown since 2022, while the market broadly has expanded meaningfully
On Wall Street, we call that an 'oofiter'
Dr. Squatch’s Success
Meanwhile, Dr. Squatch is one of the most successful emerging brands of the millennia, growing revenue to $400m and EBITDA to $90m by 2024, off of just a seed round.
Men’s care is a notoriously difficult demographic to crack - and no brand has done it as meaningfully as Dr. Squatch since Axe; which was created by Unilever in the 80s but didn’t launch until the 2000s in the US (remember UL is a UK company).
More on Axe & its role in this acquisition in a bit.
Unilever Portfolio Rebalancing
Ok so far we’ve established; Unilever is meh, Squatch rules, and the market has been growing.
Unilever posted a few years of unimpressive growth in the personal care business and hasn’t had a really meaningful growth year since 2019:
So Unilever began to offload assets - in 2024 alone they dumped:
- Unox & Zwan
- Pureit
- Qinyuan
- Elida Beauty (Q-Tips)
This was a divestment spree I covered well - and it told me that 2024 was a defense year; meaning 2025 was an offense year. In my 2025 predictions from 12/31/24 I said Unilever would make the biggest acquisition of the year, and this is likely going to be it.
Axe
Ok so here is where it gets interesting - Axe is responsible for about $2B of UL’s $14B personal care revenue, making it the 4th largest brand. Dove, Rexona, & Lux are all ahead of Axe in terms of share in the portfolio.
But those are all mostly international brands.
P&G has Old Spice & Native, both of which appeal to men in the U.S. - meanwhile Unilever just has axe, which is declining in popularity.
So i’m the CEO of Unilever, & you’re telling me there’s a direct replacement to the US men’s care market with scaled revenue, hyper growth, and EBITDA margins in excess of 20%, and has been PE owned for 3 years….?
I’m actually starting to think that my valuation estimate might be low, but let’s get into that anyways.
What did Unilever Pay?
Ok so in case this isn’t clear….I make guesses all the time. I would never put in my literal substack or god forbid twitter material non-public info. If I know it to be true, and its not public I just won’t comment. What that means is I don’t know anything about Squatch, but I can rely on public data to make good guesses.
We know that in 2024 Dr. Squatch did $400m in sales & $90m in EBITDA. I am just going to assume a range of growth rates from 20-50% in this valuation, with EBITDA margins consistent at 23%-ish.
Ok here are my comps; Aeseop is honestly such a direct comp I am going to overindex on it.
So, using min and max sales & EBITDA multiples, i am getting somewhere between $2B and $4.8b. Let’s narrow that down.
Medik8 is a wild comp. Let’s strike it. I mean 44x EBITDA? Shit, maybe…..
When I strike Medik8, my new max is $2.4b. This would have been my best & final guess…but I woke up feeling BULLISH. I think it could be higher!
Let’s just say Squatch is doing more like $550m in revenue, I can squint and see a transasction that pushes towards $3B.
Summit Partners was public in saying that they wanted $2B a year ago for Squatch. I’m not sure that number would have gone up TOO much, but also we are in the middle of a heater in M&A. Man I am so conflicted. If it is above $2.5B I am going to be like I KNEW IT.
But, $2.5B is my final answer. Which begs the question…..
What does success look like?
Success with Squatch - in my opinion - HAS to be scaling the brand into a full blown replacement to Axe, and not over 20 years - ASAP.
Unilever’s personal care segment did $3B in operating profit last year on $14B of top line. In order for Dr. Squatch to be a meaningful contributor into the business, it needs to grow to $350m in annual profit by 2032. Why? At that point Unilever can declare that it’s regained exposure to the market that Axe lost and that Squatch can be a ‘hero brand’ on its way to $2B in top line and beyond.