_{DEAL OF THE MONTH}

Unilever Bets $1.5B on Soap

Over 75,000 Bigfoot sightings have been reported to the Bigfoot Field Researchers Organization (yes, that’s real). Not one of those Bigfoots had a CPG growth strategy, but that didn’t stop Unilever from dropping $1.5 billion on a brand built around him.

Unilever has made a $1.5 billion bet on Dr. Squatch, a men’s personal care brand.

Dr. Squatch took a page from the Old Spice playbook, realizing that while there may not be a better Bigfoot trap, there’s certainly a better way to sell one. The brand rose to fame thanks to quirky, memorable ads and a promise of all-natural ingredients.

More recently, Dr. Squatch went viral for its most degenerate product yet…

I’m not saying this was the main reason for the high price tag, but I also didn’t hear anyone at Unilever publicly deny wanting a friends-and-family discount on Dr. Squatch’s Sydney Sweeney bathwater soap, either.

Dr. Squatch is currently owned by Summit Partners, a growth equity firm that has invested in over 550 brands across various industries.

Like most growth equity firms, Summit has plenty of investments you’ve probably never heard of. But they’ve also backed some recognizable names, from Brooklinen—where every guy buys the first pair of sheets he owns that aren’t from his college dorm room—to Philz Coffee, an LA favorite. Summit is no stranger to owning high-growth brands and exiting them at the right time.

There are not a lot of details available about the Dr. Squatch transaction, but given how early stage Dr. Squatch is and how little Unilever is willing to disclose about the transaction, you can bet your next bonus that the multiple is something that would make me scream.

In terms of its share price, Unilever is down ~3% over the month and has dropped ~2% since the announcement of the Dr. Squatch transaction.

This decline cannot be solely attributed to the Dr. Squatch acquisition though. Unilever is expecting to post results at the end of July, is in the middle of de-merging its Magnum ice cream business, and has to deal with Trump changing tariff policy every 15 minutes, so the odds of a meager $1.5 billion acquisition dramatically changing its share price are pretty low.

To me, this deal is a bit reminiscent of the Pepsi x Poppi transaction (if you remember from my coverage of that one). A big company realized that, rather than invent a better product, it can just buy one from a growth equity firm for a crazy multiple and capitalize on all of the growth that has been realized to date.

While that approach sounds good to any Corp Dev guy at a big company looking to earn his RSUs, you have to remember that these brands, be it Poppi or Dr. Squatch, thrive because they can do things that big companies typically don’t allow.

Would Pepsi let Poppi send a bunch of vending machines to influencers for the Super Bowl in a definite loss-making endeavor? Probably not. Would Unilever let Dr. Squatch sell Sydney Sweeny bathwater soap for the meme? Definitely not.

It’s precisely that rule-breaking spirit that fuels the growth making these brands attractive in the first place. And too often, it’s that same spirit that big corporations accidentally kill once they take over.

While I hope otherwise, I fear that Dr. Squatch might soon need a doctor of its own once Unilever steps in.

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_{NEWS ROUNDUP}

Top Reads

• Elon Musk’s xAI seeks up to $200bn valuation in next fundraising

• SpaceX seeks capital at a $400 billion valuation

• Thoma Bravo will acquire NYSE-listed Olo in a $2 billion take-private deal.

• Apollo invests $750 million in Mumbai airport 

• Recognize closes $1.7 billion fund for AI-based digital services

• KKR acquires Spectris for $6.5 billion

• Advent agrees to acquire LayerZero, a provider of power products for data center infrastructure.

• Warner Music and Bain Capital launch $1.2 billion catalog investment vehicle

• Trump delays reciprocal tariffs to August 1

• Copper prices hit a record high on tariff announcement

• Coller raises $6.8 billion for credit secondary deals

_{STRATEGIC DEAL OF THE MONTH}

If Everything is AI, Nothing is AI

This is a deal that should be near and dear to all of our hearts. For those of you who are or were bankers, you probably remember that when you had comps you didn’t want to spread, you would send them off to some poor soul in India. They would do a solid 7/10 job, but hey, at least you didn't have to do it, right?

Well, one of the main firms that provided that service (and apparently enough other ones) is WNS. In a twist I never saw coming, Capgemini is acquiring WNS for $3.3 billion as an AI play.

I won’t profess to know much about WNS beyond that they had a solid 50% hit rate on my comps sheets, but I can almost certainly tell you that their AI play feels a lot like the Builder.ai play, which turned out to be a bunch of guys writing code rather than anything resembling true AI.

Capgemini clearly disagrees with me because they were able to secure a bridge loan to cover the $3.3 billion cash purchase of securities and the $0.4 billion of gross debt obligations assumed as part of the deal.

The financing package will be refi’d out utilizing available cash and a new debt facility (we’ve all heard that before).

In terms of synergies, Capgemini expects to generate 4% accretion by 2026 and 7% accretion by 2027, resulting from over $100 million of revenue synergies, and over $50 million of cost synergies (read: headcount reductions).

So, with all of this positive news you would think that the deal would be a banger for both Capgemini and WNS shareholders.

And you’d be right, at least for WNS. The offer price of $76.50 per share is a ~40% premium to the unaffected share price, which has caused a huge surge in the share price over the past few days.

Remember though, the target company will never trade up to the offer price as there is always some risk that the transaction does not close.

I wonder if someone at WNS did the comps to help justify the 40% premium…

As for Capgemini, you might assume their shareholders would be acting like classic Frenchmen, waving the white flag and surrendering any gains. But surprisingly, the stock actually popped 4% on the deal announcement, probably because the press release included the magic buzzword “AI.”

All in all, this deal has the makings of a home run for Capgemini. Let’s just hope they don’t focus so much on the AI angle that my comps stop getting spread.

After all, if I was spreading comps all night, how could I give you all this insight?

_{UNSEXY DEAL OF THE MONTH}

Home Depot is Back in the M&A Game

When all else fails (and I’m exhausted from writing about the “sexy” corners of the market) I can always count on bankers to dig up an unsexy industry for a deal every month. Who needs AI or flashy marketing when you’ve got good old-fashioned know-how and a big balance sheet to keep the square wheels of progress rolling?

This month’s unsexy deal is Home Depot acquiring GMS for a whopping $4.3 billion equity value, or a ~$5.5 billion enterprise value, or ~10.0x EBITDA. 

Before we go any further, let’s note that Home Depot is doing this deal through SRS Distribution. If that name rings a bell, it should. That’s the same SRS they bought for $18 billion back in May 2024, a deal I covered at the time.

The deal is being struck at $110 / share, which is a hefty premium to the unaffected share price.

Where this unsexy deal starts becoming more like the Sydney Sweeney bath soap is that this wasn’t the first offer that GMS received. That first run-up in share price that you see is actually as a result of an unsolicited offer from QXO for $95.20 per share.

Unfortunately, Home Depot’s IR guy looks like he has taken a vacation, because they did not put out a presentation for this one. From what we can glean from reading rather than looking at pretty pictures, Home Depot will be funding this deal utilizing new debt and some cash on hand, with the goal of reaching 2.0x leverage by the end of FY 2026.

Home Depot’s share price has been flat over the month, which, with all of the recent turmoil in the market, is probably about as good as you can hope for when you announce a major acquisition.

Home Depot isn’t new to big deals and is clearly executing well on integrating SRS. Bolting new businesses onto that platform is precisely what they intended when they bought SRS in 2024.

Though, I’m not entirely sure they told the board they’d be dropping 10x multiples on their future targets when they pitched that original deal…