Monday, December 21, 2015

Avon Buyout

On Dec. 17, Cerberus announced that it will purchase Avon's North American operations. Avon has been struggling and this is thought to be a way of booting out the old management and making some important changes in how the firm markets beauty products. Do the markets bear this out?

1. If so, investors should value Avon more, and they do. See the stock market effect for Avon on 17 Dec here:

2. Also, if the buyout improves Avon's performance, it will likely come at the expense of competitors. And it seems that it does. Estee Lauder appears to have taken a hit.

Revlon, though, appears flat with the news. 
L'Oreal's stock price fell over the next two days.

Coty also closed lower but the decline started a day later two. (Coty's brands include: Calvin Klein, Chloe, Davidoff, Marc Jacobs, OPI, philosophy, Playboy, Rimmel and Sally Hansen.)

It does seem curious that the price responses for competitors are all a day later. But in all, it seems that this acquisition will move an asset to a higher valued use.


  1. These sort of things are something that always have effect on the market, so we got to be careful with how we work out everything. I am trading with high quality broker in OctaFX, it is a great company with been regulated plus a true ECN broker as well, so with them I am always having edge. I always get daily market news and analysis updates, it really helps me working in easy and simple way which leads to consistent profits.

  2. Yes, the sale of Avon affected the stock prices of other cosmetics firms; however, I think it is important to look at companies similar in business model to Avon to see where some of their business strain has come from. Younique, Arbonne International, Rodan and Fields, and many other direct marketing cosmetics companies have popped up on recent years They are the newer, more modern version of the “Avon lady”. Avon uses home parties to sell to customers. The newer companies use person-to-person, but also a great deal of social networking sites to get their customer base. Avon needed to grow with the industry. Other companies have created competitive advantage over Avon. Avon was deemed the Worst company of 2015 That, should have signaled a need for change, but even with new leadership, Avon kept failing.
    Again, Avon needed to do one of these three things to comeback: Cost reduction, product differentiation, or hope the competitive industry reduced (and that clearly did not happen). Avon didn’t innovate and they didn’t employ a low-cost strategy, so the obvious happened.