The case examines the strategic rationale for the acquisition of The Body Shop – from the perspective of the buyer (Natura) and the seller (L’Oréal) – with an emphasis on the study strategic fit, synergies, and integration challenges. In particular, it requires students to think about whether the various characteristics of the parent affect the success of the target company, and whether the target can be value-accretive to the parent. Discussion can go deeper into the notion of parenting styles and value added by reflecting on the challenges faced by The Body Shop under its former owner, L’Oréal, and the pros and cons of the new Brazilian parent, Natura. The financial analysis allows students to assess the “fair” value of The Body Shop – again from the perspective of the buyer and the seller. The case allows for a DCF-based company valuation (excluding and including synergies) as well as for a Multiples-based valuation. Students are able to compute the opportunity cost of capital (WACC) for The Body Shop based on case facts and the CAPM (as well as beta un- and re-levering). This can lead into a discussion about how the characteristics of different buyers (e.g., a strategic buyer vs. a private-equity firm) might affect the firm’s valuation, and, indeed, might have affected the outcome of the auction.
- Study a M&A transaction from a seller’s and acquirer’s perspective - Assess the target using multiple valuation techniques - Review reasons for divestiture (and alternatives to divestiture) and the divestiture process - Understand the difference between a strategic vs. financial buyer - Discuss the specificities of CSR-driven acquisitions
- M&As
- Divestiture
- CSR Business
- Company Valuation
- Strategic vs Financial Buyer
- Cosmetics Industry
- Buying a CSR Business
- Post-Merger Integration
- Corporate Parenting
- DCF
- Multiples
- WACC
- Q42022
