By  on September 5, 2014

California is nicknamed the Golden State, but for beauty brands, a better moniker might be the Green State. Beauty conglomerates and private equity firms are pouring cash into California at an unprecedented rate. L’Oréal is perhaps the state’s biggest beauty sugar daddy. In less than two years, it bought three Southern California brands: NYX, Baxter of California and Urban Decay. But it’s hardly alone. The Estée Lauder Cos. nabbed Smashbox, Coty Inc. snapped up OPI Products Inc., Henkel AG added Sexy Hair Concepts earlier this year and the list goes on.

What’s behind the great innovation machine that is California? “It’s in the water. It’s in the sunshine. It’s in the creativity,” quips Mona Monaghan-Kelliher, who recently moved from New York to L.A. to become chief marketing officer of Milani. Vennette Ho, managing director at Financo, says, “The West Coast is a huge center of innovation for the beauty industry, and is its own little microcosm in terms of talent.” In particular for beauty, California’s pole position in digital technology, celebrity culture, the health and wellness movement and as the gateway to Asia makes it fertile ground for beauty upstarts.

No wonder, then, companies born there have become attractive acquisition targets, a fact not expected to change soon. Talking about the mergers and acquisitions market, Andrew Charbin, senior vice president at The Sage Group, says, “Deal volume will stay high for the rest of this year. There are all kinds of records that could be broken. We’ll see a good number of companies that aren’t in market now consider going into it fourth quarter this year or beginning of next.” Here, 10 California-based brands that industry insiders say beauty buyers would be happy to get their hands on.

JOSIE MARAN

Josie Maran personifies the golden girl ethos of Southern California, but the former model has channeled the business savvy of her birthplace into her role as beauty entrepreneur. “I’m from Silicon Valley, so it’s in my DNA,” says Maran. Undeniably, the change-the-world, go-with-your-gut gusto of Silicon Valley is ingrained in Maran, who launched her prestige eco-conscious cosmetics brand in 2007. “I would always ask makeup artists if they had something that was healthier, but they would say it was impossible to have healthy, natural products that were good enough. I really wanted to prove them wrong,” she says. The argan oil that’s become a centerpiece of Maran’s line was a fortunate accident. “I discovered it on a modeling trip and fell in love,” she recalls. Today, argan oil is used in everything from her mascaras to moisturizers, and accounts for a third of sales. Prices range from $6 to $96 for the L.A.-based company.

A brand so dependent upon a single ingredient might seem like a risky bet. But argan oil is the liquid gold that transformed the format into a significant category in the U.S. “Josie Maran will keep its first-mover status,” says Jani Friedman, vice president of new brand development at Guthy-Renker and a former managing director at Demeter Group. “They’ve made it very easy for people to get into oils.”

If Maran wanted to sell—which she and her husband, brand president Ali Alborzi, insist they have no intention of doing—Friedman and financial sources say it would field plenty of offers. Alborzi said sales have grown from $1 million in 2009 to more than $100 million annually, which could garner $200 million to $500 million in an acquisition based on recent multiples.

“We are self-funded, and we plan to remain so. I meet with people because it’s important to understand the climate,” says Alborzi. “Our vision is to pass it down to our kids, but who knows what the climate can look like, though we have definitely gotten over the hurdle of needing a money injection through a partner.”

Currently sold on QVC and in Sephora in the U.S., the brand is expanding internationally and considering infomercials and stores. “We have gotten here through intuition and Josie’s drive,” says Alborzi. “We think there is a huge potential to grow even bigger.”

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