Case Study

e.l.f. Cosmetics

e.l.f. Beauty Inc.

While we are generally skeptical of investments with fashion or fad risk, the opportunity presented by e.l.f Beauty Inc. was one that cleared the high bar that we have for investments of this nature. e.l.f Beauty Inc. is a leading multi-channel beauty brand that sells lower-priced cosmetic products. Founded in 2004, it is one of the fastest growing beauty brands in the United States.

TPG Growth, a private equity sponsor, acquired e.l.f. in 2014. For timing reasons, the sponsor did not reach out to a broad group of lenders, and we were one of the first calls. With a promising opportunity at hand, we completed the work necessary to understand the dynamics of an industry that can be cyclical and unpredictable.

PennantPark conducted multiple diligence sessions with management and coordinated its research efforts with that of the sponsor. The objective was to identify the true value of the e.l.f brand and to assess the company’s growth prospects, specifically its ability to expand distribution to new retailers.

After concluding a rigorous diligence process, PennantPark agreed to provide a $40 million second lien term loan as well as $4 million of equity to support TPG’s acquisition of e.l.f.

Outcome:

PennantPark Key Advantages: