Inside the deal: Yellow Wood’s bet on sexual wellness

'We all have been hearing about men’s sexual wellness for years with the hundreds of millions of dollars of media spent on Viagra,' said Yellow Wood's Jennifer Roach. 'It is time for the rest of our society to share in that experience.'

Being a trailblazer can be a burden, as it entails taking risks. If trying something new fails, the fallout may be immense, but if it succeeds, the rewards could create a lasting legacy. Yellow Wood Partners is hoping for the latter outcome as it forays into a space that few PE firms had ever dared to venture before: sexual wellness. To learn more, PE Hub checked in with Yellow Wood principal Jennifer Roach.

A year ago, the Boston-based mid-market buyout shop generated industry chatter when it announced the formation of a new sexual wellness platform called Beacon Wellness Brands, building on the earlier acquisition of several brands from Clio.

“We’re here to change the game with the first line of affordable, high-quality sexual wellness devices and products that are easily available for purchase at food, drug and mass retailers nationwide,” reads the website for PlusOne, Beacon’s anchor brand. The company’s vibrators are sold at Walgreens and CVS drugstores.

To lead the platform’s growth, last month, Beacon brought aboard veteran consumer goods executive Lisa Tanzer as CEO. Most recently, Tanzer was president of Katie Couric Media Marketplace where she focused on elevating purpose-driven brands. Prior to that, she was president of positive lifestyle brand Life is Good.

Early indicators about Yellow Wood’s bet on this space are promising. Since its launch, Beacon has raked in $100 million in retail sales, according to Nielsen.

Consider these statistics: the global sexual wellness market size is expected to reach $125.1 billion by 2026, forecasts one report.

Couple the rosy forecast with PlusOne’s presence on mainstream retail shelves, along with the waning taboo of sexual wellness, and it’s easy to see why PlusOne was an especially attractive acquisition for Yellow Wood.

“The growth was the strength of the brand,” explained Roach.

“We see numerous databases and try to sift through where we find areas of interest,” recounted Roach, when discussing the genesis of Yellow Wood’s interest in the sector. “We had been looking at this space before covid. We saw emerging trends and brands we were excited about.”

After extended talks with Jamie Leventhal, the chief executive of Clio – parent company of PlusOne and Deia, another acquired sexual device brand – Yellow Wood was able to hammer out a deal at the end of 2021.

‘No blush zone’

It did not come without snags. One issue Yellow Wood struggled to resolve was convincing nervous LPs about the transaction. However, as Roach related, the firm did have an ace up its sleeve — an eclectic and open-minded team.

“We have a diverse firm at Yellow Wood,” Roach explained. “That diversity helps us to see this investment idea that other firms would not see. We have a ‘no blush zone.’ We try to take on sectors that may be challenging from some perspectives.”

Probably the biggest obstacle Yellow Wood faced was getting debt providers to sign on the dotted line.

“We had to speak to quite a few, and quite a few were not ready to commit to the sexual wellness space,” admits Roach. In the end, Ares Management and Stifel came through, leading the debt financing.

“By the time I gave the Beacon Wellness presentation to the LPs this past fall, we shared a lot of data with them and why we were excited about this brand,” says Roach. “That’s what we needed. We needed a financial sponsor to step up and say, ‘We’re going to champion investing in this category.’”

Yellow Wood may be the first notable PE firm to invest in the space, but judging by recent activity, it’s not the only one. In December, Chicago-based Linden Capital acquired LifeStyles Healthcare, a global sexual health and wellness platform, from a consortium of investors including Trustar Capital and Humanwell Healthcare. Among the products in LifeStyle Healthcare’s portfolio are branded condoms and personal lubricants. Linden did not respond to numerous queries from PE Hub to comment on this deal.

When asked if Yellow Wood will acquire add-ons to the Beacon platform, which also has a personal care division, Roach said she could not reveal them now but confirmed the PE firm “definitely” has plans.

“Our goal is to be a leader in this category,” she said. “We all have been hearing about men’s sexual wellness for years with the hundreds of millions of dollars of media spent on Viagra and other male products. We strongly believe it is time for the rest of our society to share in that experience. It’s really about empowerment for all genders and the destigmatization of sexual wellness. It is an exciting endeavor and one we are very much focused on.”