For the past few years, skin care has been the mainstream in the beauty M&A scene, but this year may be different.
After struggling amid the global coronavirus pandemic, the color cosmetics category is finally starting to pick up steam as consumers return to offices and start going out again. The category’s combination of innovation and clean formulas contributed significantly to driving sales to pre-pandemic levels.
Currently, this booming activity is likely to be reflected in M&A activity, particularly in the specialty color cosmetics field.
“Last year was the first year we really saw new growth in color, and investment decisions are not made in a vacuum. They are driven by real trends.”Ohana said Ariel Ohana, an investment banker at & Company.
“This new class of brands have all raised funding within the last two to four years. Investors typically like to hold for three to five years, exiting when the market is trending in their business’ favor. I am thinking of doing so.”
Take Corsus Cosmetics, a Los Angeles-based makeup brand founded by Sheena Zadeh Daley in 2015. We were the first to enter the clean cosmetics category. WWD reported in January that it had hired investment bank Northpoint to explore sale options, according to industry sources.
Other brands that could be ripe for acquisition in 2024 include Merit, Makeup by Mario, Saie, Milani, and Tower 28. Westman Atelier and Selena Gomez’s big-name Rare Beauty are also on the list, but officials believe they are likely to be targeted in 2025.
At the same time, TSG Consumer Partners is rumored to be considering exiting Huda Beauty, in which it acquired a minority stake in 2017.
But as successful as many of these companies are, insiders are wondering: Are there enough potential bases for all these brands, and who might make a bid? I’m wondering.
The answer seems to be yes, but some buyers will not be traditional players.
Private equity is becoming increasingly active in the beauty field. In the last year alone, Yellow Wood Partners acquired both the Suave North America and Elida portfolios from Unilever, as well as ChapStick from Haleon. And the company hasn’t been shy about the fact that it’s looking for more brands to add to its roster.
In 2021, Orbeon, backed by Advent, acquired Laura Mercier, Boxam and Bare Minerals from Shiseido. The company has been looking for a skincare target, but with a new CEO at the helm, this year’s strategy is unclear.
Athletes from overseas are also showing increasing interest. “Two new categories of strategies are likely to become active in 2024,” Ohana said. “As Asia strategists have become more familiar with M&A in recent years, luxury strategists are now considering beauty as a top priority investment area.”
For example, Kering, the owner of Gucci, has been aggressively strengthening its beauty division, adding luxury fragrance house Creed to its umbrella last year and reviewing its licensing agreement. In Asia, beauty giant Shiseido says it will focus on skin care for the time being, but it is actively seeking assets for other strategies in Japan, South Korea and China, and sources say it may also enter color cosmetics. said.
Following its acquisition of mass-stage skin care brand Naturim, Elf said it is open to further acquisitions.
However, this does not mean that the traditional strongholds of beauty brands such as the Estée Lauder Company and L’Oréal are not among them. “They’re always looking,” one source said.
Two of Lauder’s California brands, Too Faced and Smashbox, are struggling, as is the company as a whole, and there is continued speculation that the company will sell unprofitable assets. I’m denying it. Nevertheless, multiple sources told Beauty that it’s a perfect fit for Westman Atelier.
Commenting on the acquisition of the color cosmetics brand, Harris Williams Managing Director Kelly McPhilliamy said: I’m doing all of those things. It should attract very high interest. ”
But given all these possibilities, many players will likely be looking to see what happens to the companies they sell first.
“Many of them are concerned that the home the brand has found will dictate how the market develops, given that Cosus will probably be the first brand,” said Maggie Wilmuth, William Blair’s vice president of consumer and retail. “We are saying that there is a possibility that this could become an indicator.” The rest of this year. ”
McPhilliamy added, “It’s a good idea to look at the chess board and see which piece was taken first and what that means for the second, third, fourth, and fifth pieces.” It’s going to be interesting,” he added. This is certainly going to be an interesting year to see who is going to step forward or wait to see where things land and where the interest is. There will be many things to pay attention to. ”