Galderma pays 4.5 times sales for ZO Skin Health; margin dilution starts in 2027
Galderma will pay $1.5 billion of enterprise value in cash, using cash reserves and bank financing, for a business with about $330 million of trailing sales. It expects neutral Core earnings per share in the first full year and slight margin dilution in 2027.
Galderma will pay $1.5 billion of enterprise value for 100% of ZO Skin Health, using cash reserves and bank financing. That is about 4.5 times sales. The company expects a small margin hit in 2027.
Galderma's release puts ZO's net sales at about $330 million in the twelve months to June 2026. That gives the multiple of roughly 4.5 times sales. The buyer says it will increase commercial investment during the first year of ownership "to strengthen the foundation for renewed growth beginning in the second year following closing".
The price reflects ZO's brand and clinic network, as well as Galderma's plan to rebuild growth. The buyer expects to increase commercial spending in year one, with renewed growth beginning in year two.
ZO sells through more than 16,500 physician, medical spa and online accounts in over 40 countries. Sales divided by accounts come to about $20,000 per account each year. The estimate is rough because it includes online sellers, but it gives a sense of the company's many small clinician relationships. Galderma is buying that network as well as the products.
The sellers are funds managed by Blackstone Tactical Opportunities and the Obagi family. Blackstone says ZO's revenue more than doubled during its ownership, which it calls "an important period of growth", but gives no dates. Galderma's chief executive says the deal will help ZO "reignite its growth". The release gives no growth rate for the latest year, so it is not clear how recent that doubling was.
In its first-half results, Galderma reported net sales of $3,134 million, up 24.6% at constant currency, which excludes exchange-rate moves. It raised full-year growth guidance to 19% to 21%.
ZO's $330 million in sales is about 5% of Galderma's annualised first-half sales. The acquisition is small compared with the parent company's growth rate.
Galderma's Core EBITDA margin was 25.6% in the first half, with full-year guidance of about 26%. Core EBITDA is its adjusted earnings before interest, tax, depreciation and amortisation. The release expects the deal to slightly reduce Core EBITDA margin in 2027 and be broadly in line with the group from 2028. ZO's margin will therefore be below the group's in its first year, with increased commercial spending adding to the cost.
Core earnings per share are guided to be neutral in the first full year after closing. The group's Core EBITDA rose 42.8% at constant currency in the half, from $555 million to $802 million. So ZO's margin drag is measured against a parent whose profit is growing much faster than its sales.
Galderma's Core net income was $547 million in the first half, up 66.3%. Core earnings per share were $2.34, compared with $1.39 a year earlier. Against that profit base, a business with $330 million of sales is a small contributor.
Neutral Core EPS in year one is the company's guidance for how the financing cost and the extra commercial spending net against ZO's earnings.
The financing will affect Galderma's balance sheet. At the end of June 2026, the group held $839 million in cash and had total indebtedness of $2,625 million. Net indebtedness was $1,786 million, down from $1,822 million at the end of 2025.
That is a net leverage ratio of 1.2 times Core EBITDA on a twelve month rolling basis. The ratio implies rolling Core EBITDA of roughly $1.49 billion.
The purchase price equals about 94% of the group's $802 million in first-half Core EBITDA, annualised. That is close to a full year of group profit before interest. Net debt rises by the full $1.5 billion whether Galderma uses cash or borrows: cash payment reduces cash, while borrowing increases debt.
Add the price to the debt: 1,786 plus 1,500 makes net debt about $3.29 billion. That is roughly 2.2 times rolling Core EBITDA before ZO contributes anything of its own. Each $50 million of ZO EBITDA would take about 0.07 off that multiple, so the figure settles a little above two turns in the first full year.
The company says the financing is "in line with Galderma's commitment to a solid investment grade credit rating". Leverage rising from 1.2 times to about 2.2 times leaves that commitment credible.
Total indebtedness was $2,625 million, almost unchanged from $2,602 million at the end of 2025. Galderma has not been borrowing to fund growth, but this acquisition changes that.
At 4.5 times sales, with no ZO margin disclosed, the purchase price is difficult to call cheap. ZO's sales are about one twentieth of Galderma's. The company describes the margin dilution as slight, and leverage would rise to about 2.2 times, roughly one turn above June's 1.2 times. That is a noticeable increase for a company that had just reduced its net debt.
The deal's longer-term value depends on whether physician accounts respond to the increased commercial effort. Galderma expects that growth to begin in the second year.
The deal is expected to close in the fourth quarter of 2026 or early 2027, subject to regulatory approvals and customary conditions. Galderma expects slight margin dilution in 2027 and group parity from 2028.