Elevation Labs Acquires Smaller Copacker Boomerang Laboratories

Elevation Labs has acquired beauty manufacturer Boomerang Laboratories to diversify its geographic and merchandise reach.

Terms of the deal weren’t disclosed. Started in 1999, Boomerang was previously purchased by private-label and contract manufacturer Guy & O’Neill in 2020. Private equity firm Centre Partners invested in Guy & O’Neill in 2018.

Elevation Labs, which was founded in 1995 and bought by private equity firm Knox Lane in 2022, is housed in a 260,000-square-foot facility in Idaho Falls, Idaho. The company acquired manufacturer Colorado Quality Products in 2018 to extend its footprint to Denver, where it now has a 160,000-square-foot facility. Boomerang has a 75,000-square-foot facility in Spring Park, Minn., a city about 20 miles west of Minneapolis.

Elevation Labs specializes in skincare, haircare, color cosmetics, body care and over-the-counter products, particularly in the clean beauty realm. Boomerang specializes in skincare, haircare, personal care and light-duty household cleaning products. According to Elevation Labs chief innovation officer Amy Hart, Boomerang serves about 25 brands, roughly 100 fewer than Elevation Labs.

“It’s a smaller, growing team that’s pretty scrappy, but very well versed in producing high-volume products very competitively, and there’s the light household cleaning aspect that we didn’t really do at our locations,” says Hart. “They can do dish products and pet products, so we are adding more capabilities that we haven’t had in our other locations.”

Elevation Labs is working to expand its wallet share with clients, an objective that the Boomerang purchase can facilitate. “We just got off a call with a customer at Boomerang that has been looking to fill squeeze tubes. Boomerang doesn’t currently have that capability, but we do have it at our other locations,” says Hart. “It opens up the options of handling what Boomerang can’t while maintaining a high level of service and innovation.”

Consolidation has been transforming the highly fragmented beauty copacker segment. One estimate pegs the number of United States copackers in the segment at around 300, with some 200 of them generating revenues under $10 million and 100 with revenues over $10 million, including half with revenues over $20 million. Private equity firms have been a propellant for consolidation in the segment, and both private equity firms with contract development and manufacturing organizations (CDMOs) in their portfolios and those without circled Boomerang.

“There clearly is still a lot of interest in getting into the CDMO space on the part of private equity. Even if they are not already involved, they are interested in getting involved in the industry going forward,” says Wendy Nicholson, managing director of the beauty and wellness team at financial services company Baird, which advised Boomerang on its sale to Elevation Labs. “There continues to be new entrants.”

“There clearly is still a lot of interest in getting into the CDMO space on the part of private equity.”

She identifies Boomerang’s partnerships with rising brands as a big reason for the interest in its business. For companies like it considering a potential sale process, she says, “One key area in due diligence is the visibility of growth or the traction that a CDMO has with their key customers, so to be able to say that you have a long-term and growing strong relationship with your customers is incredibly important along with being as consistent as you can be in your service levels.”

Multiples in the beauty manufacturing space have typically been in the mid-single digits to the low double digits of late. Activity in the space cooled from late 2022 through last year, but there were a few deals. For example, Gemspring Capital acquired Bradford Soap International, and Mitsui & Co. acquired Dermaceutical Laboratories. Nicholson predicts deals in the copacker space will pick up this year.

“The outlook for underlying growth in the industry, whether it be on the personal care side or more specialized beauty side is strong and that will drive growth for contract manufacturers,” she says. “I also think we are looking at a generally more favorable backdrop from a cost perspective for labor and commodities. To the extent the contract manufacturers will show expanding profit margins, that will help support premium valuations.”

Elevations Labs remains on the hunt for assets to bring under its umbrella. “It’s got to be the right fit,” says Hart. “It has to complement capabilities or geographies that we don’t have and have high quality with great customer service.”