The beauty world has been inundated with companies hitting the M&A market more than a year into the coronavirus pandemic.
Financial sources said many beauty brands hired bankers to explore selling or finding investors after experiencing unprecedented growth during the COVID-19 era. Others are simply out there trying to get a sense for their current valuation — and if now is the right time to sell or not, with many deciding in the end to pull their processes, sources said.
“A lot of the independent brands that were speaking for customers in different ways stood out in the pandemic,” said Vennette Ho, managing director at Financo Raymond James. Many independent brands did well, she noted, and buyers are looking for brands that have successfully navigated the constant shifts in the retail environment over the course of the pandemic. Strategic buyers and private equity firms are both active, Ho noted, though companies today also have the option of the public markets via a traditional initial public offering or a SPAC deal.
“The amount of activity is very high,” Ho said.
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Recent transactions include Advent International’s deal to purchase BareMinerals, Laura Mercier and Buxom from Shiseido for $700 million; Crown Laboratories’ agreement to buy Strivectin from L Catterton, and Function of Beauty’s acquisition of Atolla, with plans to move further into personalized skin care.
“What we’re seeing is more assets out there but smaller assets,” said Nadia Pelaez, director at RBC Capital Markets, who noted that while many assets are floating around in the market, not all are attracting buyers or investors. “We are seeing more…deals that are getting pulled,” she said.
Category wise, “clean” is now table stakes, and companies across categories have been coming to the market.
“Right now what people are focusing on is skin care,” Pelaez said. “Clean is good, but what people really want is clinical. Consumers are voting with their wallets…and saying, ‘Well, if I’m going to buy new skin care, I want there to be some efficacy behind that.’”
Pelaez also said the hair category is “at an inflection point,” with new entrants disrupting a previously stale category, and that makeup deals may be making a comeback.
“With the trend being upward in color cosmetics, I would expect more color cosmetics assets to come to market as they’re able to prove that post-COVID-19, they’re growing,” Pelaez said.
One of the most talked about assets in the market right now is Ilia, which is said to have hired Goldman Sachs to explore potential deals, industry sources said. The brand marries makeup and skin care, and has one of the bestselling foundations at Sephora with its Super Serum Skin Tint SPF 40 Foundation. Industry sources said Ilia’s sales are skyrocketing, and that the business is expected to hit $100 million in sales for this year.
Chantecaille, the family-owned luxury makeup and skin care brand founded by Sylvie Chantecaille, is also in the market with Jefferies, WWD has confirmed. Chantecaille said the brand is looking for a partner to continue growing. Both strategic buyers and private equity firms are said to be involved in discussions, and the business is said to have about $120 million in sales.
Il Makiage, which was exploring a potential sale or IPO with Centerview, is now said to be planning an IPO.
In skin care, there are many assets that are said to be out in the market.
Among them is Tula, which was an early mover in probiotic skin care and is said to be doing about $150 million in sales. The business, which has been backed by L Catterton since 2017, has hired Financo Raymond James to explore options, industry sources said.
Image Skin Care, the professional line, is said to have hired Bank of America to consider options. YesTo, the mass market skin care business, is said to have hired Piper Sandler. NuFace has hired Financo Raymond James to explore options, sources said. Beekman 1802, the goat-milk oriented skin care and body care business, is said to have hired Moelis to explore options. Pacifica is said to be nearing a deal, and to have hired Jefferies.
There’s also Supergoop, the SPF-focused brand founded by Holly Thaggard and backed by Encore Consumer Capital. Supergoop is said to have done $60 million in sales for 2020, and industry sources said the business has hired Goldman Sachs to explore deal options.
Industry sources said there are a few additional body care-focused companies in the market, including Frank Body, which is said to have hired William Hood to explore investment options, and Sol de Janeiro, which is said to have hired Financo Raymond James.
In the hair care segment, financial sources expect the IPO of Olaplex to propel even more interest in the category, they said. Jen Atkin’s Ouai is said to be considering deal options. Financial sources said the company hired Jefferies.
In the ingestible world, industry sources said that cult supplement brand Moon Juice, founded by Amanda Chantal Bacon, has hired William Hood to explore options.
The brands said to be in the market declined to comment for this story. The banks said to be representing those brands declined to comment, or did not respond to requests for comment.
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