Charlotte Tilbury

A new decade means new beauty deals.

And while the types of transactions may shift, investor appetite for beauty companies seems to be a constant.

“I would not anticipate 2020 to be as robust, with that number of marquis independent brands getting sold,” said one financial source, referring to the 2019 sales of Elemis, Morphe, Drunk Elephant and Olaplex.

This year, beauty M&A is expected to remain solid, industry sources said, with a lot of action around skin-care companies and contract manufacturing.

“Private equity firms are looking to consolidate the contract manufacturer space right now,” said Andrew Shore, managing director at Moelis. “There are some tendencies of private equity to try to be the consolidator in this space,” agreed Muriel Petit, managing director at BNP Paribas.

It’s a trend that continues from the past few years. Private equity groups have been attracted to manufacturing deals because they provide multiple potential growth levers, versus brand bets. In the past few years, private equity-backed KCD-One has made many acquisitions, a spree sources expect to continue through 2020, and in 2019, Bain Capital invested in Maesa, which makes private label products for places like Ulta, as well as the Kristin Ess Hair and Flower Beauty Brands. Mana is said to be exploring potential deal outcomes with the help of investment bank Guggeinheim.

Skin care is also expected to remain attractive, especially because of growth in higher-end products. Aside from appetite for prestige and luxury skin brands, natural or clean options are also interesting to prospective buyers, according to Petit. “The two together is even better,” she said.

Several skin-care brands are either in the market already, or expected to hit the market in 2020. Erno Lazlo, said to have about $40 million in net sales, has tapped Moelis to explore options, after a period of sharp growth in China. Dennis Gross Skincare, the dermatologist line, is said to have tapped Financo to sell a minority stake. Paula’s Choice, which is said to have more than $100 million in net sales, is said to have tapped Morgan Stanley, but sources said it is unclear if a deal will go through as the banker who was handling it has left the firm. Morgan Stanley declined to comment. Perricone is said to be coming out to market with Piper Jaffray. Curology, the direct-to-consumer skin-care offering, is said to be working with Financo on a transaction.

HydraFacial, the treatment business, is said to have hired Jefferies to explore a sale. Final bids are due in early 2020, sources said, and the business is said to have about $50 million in earnings before interest, taxes, depreciation and amortization.

Deciem, the multibranded skin-care business founded by the late Brandon Truaxe, is expected to be taken over in full by the Estée Lauder Cos., industry sources said. Lauder took a minority position in the business in 2017. Foreo, said to have about $200 million in EBITDA and between $750 million and $800 million in net sales, is also said to be considering options.

In makeup, all anyone’s talking about is Charlotte Tilbury, which has hired Jefferies, on top of Goldman Sachs, to explore deal options, sources said. The business has been in and out of deal conversations with Lauder, sources said, and valuation expectations are said to be high.

Indie makeup darling Kosas is also said to be close to closing a new round of funding. In the men’s grooming world, Cremo is said to have hired Goldman Sachs to explore options.

Other brands that are attracting interest from the investment community include Moon Juice, Thrive Causemetics and Function of Beauty, industry sources said. Glossier is also one to watch, sources said, as speculation swirls around a possible initial public offering.

On the larger end of the spectrum, there are a few massive assets are out in the market. There’s Coty Inc.’s professional business, which is expected to formally come to market early this year with Credit Suisse. Industry sources said that the delay has been caused by difficulty determining the EBITDA of the business, but that any and all major private equity firms (including Advent International, which just bought Olaplex with a reported $1 billion valuation), and Henkel, are said to be lining up. Any resulting deal is expected to have a price tag well into the billions.

There’s also Revlon, which has hired Goldman Sachs to sell all and/or parts of the business. Right now, that process is centered on some of Revlon’s smaller brands, like American Crew and Almay, while Revlon executives work to try to turn the rest of the business around. Though technically, sources said all parts of the business are still on the table, and Revlon is coming up against 2021 debt maturities.

For more from WWD.com, see: 

Beauty M&A Boomed in 2019

The 10 Most Important Beauty Deals of 2019

Clean Makeup Brand Ilia Raises Series B

WATCH: ‘The Bachelorette’ Hannah Brown Grades Iconic Celebrity Couples Looks

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