Year in Review: Beauty M&A Recap 2021
Despite lingering uncertainty due to the coronavirus pandemic, beauty M&A had another busy year in 2022.
Buyers and investors gravitated toward hair care and skin care, as well as anything with a self care bent. Brands with close-knit communities and digital know-how remained in high demand, and some companies opted for SPAC deals or initial public offerings in lieu of selling to a strategic buyer. The year also saw big beauty companies realign and revamp their portfolios with a variety of acquisitions, brand closures and divestitures, while private equity firms continued to compete for deals. With all those options in the market, valuations remained high, but were not always predictable, experts said.
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“It was quite an exceptional year for beauty and for the market as a whole in terms of deal activity,” said Lindsay Carlson, managing director with William Blair.
“Across the board from a transaction standpoint spanning M&A, private placements, SPACs and IPOs, we saw all the key parties jump into the game — from strategics who had cash on their balance sheets to private equity firms with a lot of dry powder, VCs [who] are looking to get in early — and really everyone has some great deals to show for it,” Carlson said. “The activity was really robust across skin care and hair care.”
Photo courtesy of Deciem
In skin care, there were several major deals. The Estée Lauder Cos. acquired a majority position in Deciem, parent company of The Ordinary, with plans to buy the rest in a few years. Unilever bought Paula’s Choice; L’Oréal acquired Youth to the People; Procter & Gamble signed a deal to buy Farmacy; L’Occitane bought Sol de Janeiro; Coty signed a licensing deal with Orveda; Yatsen acquired Eve Lom; the Waldencast SPAC inked a deal for Obagi, and Galderma said it plans to acquire Alastin.
The skin care category also saw investments in growing brands, including Carlyle’s Beautycounter deal, Eurazeo Brands investment in Beekman 1802, and investments in Hero Cosmetics and 111Skin. There were many smaller VC investments in skin care, too.
“As we’ve started to get vaccinated, everyone was talking about the Roaring ‘20s and color was going to come back strong, but when you look at the M&A deals, all the action has been in skin care,” said Ilya Seglin, managing director at Threadstone LP. “The skinification going into other categories like hair, like body, that continues to play on the consumer side, and that seems to be playing out on the acquisition side. The comeback of color is materializing not to the extent anybody thought.”
Makeup, which many in the industry predicted would have a renaissance in 2021, was slower to pick up, deal-wise. There was Shiseido’s divestiture of Bare Minerals, Laura Mercier and Buxom to Advent International, which picked up all three brands for about $700 million. The Waldencast SPAC bought Milk Makeup; AS Beauty acquired Mally Beauty; Katherine Power’s Merit raised money from L Catterton, and Beauty Pie and Glossier raised big VC rounds.
Shaun Andru
In hair care, there were also multiple notable deals, with P&G’s planned acquisition of Jen Atkin’s Ouai, and Berkshire Partners’ investment in Mielle, among them.
For P&G, the Ouai deal marks an entry into prestige hair that the company has never had, and links it with power influencer and hairstylist Atkin, who has built out the brand into a full lifestyle assortment with a digitally connected community.
Berkshire’s investment in Mielle was one of the largest ever deals in the textured hair category, and positions the brand and founder Monique Rodriguez — who also built up a major digital community for the brand — for further growth and expansion across hair and other categories. Other notable hair deals include Madison Reed’s $52 million fundraise, which has allowed the direct-to-consumer hair color brand to continue to scale, and General Atlantic’s investment in hair growth line Vegamour.
The biggest deal in hair care in 2021 was the IPO of Olaplex, which valued the company at nearly $16 billion and indicated the viability of the public markets for certain stand-alone beauty brands.
Perhaps some of the biggest deals of the year were in retail: The Hut Group bought Cult Beauty, giving it access to many beauty brands it hadn’t sold before, and Sephora acquired Feelunique, giving it access to the U.K. market.
For a full list of the year’s beauty M&A deals, investments and fundraises, see: All the Beauty M&A Deals of 2021.
Michael Toure, founder and CEO of Toure Capital LLC, said the buyers of 2021 were looking for brands with products that were functional and efficacious, or indulgent, and companies with a wellness and self care tie in, with an omnichannel strategy.
The pandemic has created a drive from founders to de-risk themselves, he said. “Everybody has been in the mindset to find liquidity,” Toure said.
The companies that have been able to profitably weather the pandemic are the ones investors are going after, Toure said.
“COVID-19 really tested the flexibility and reactivity of the management team, the strength of your supply chain and your cost structure, because if you’ve been able to manage the last 24 months profitably with a gross margin that is up, you’ve become all of a sudden a very attractive deal or investment proposition,” Toure said.
Going forward, Toure predicts many companies — especially those that got private equity investments between 2015 and 2020 — coming to market. With not enough big strategic buyers to buy them all, he said that it’s likely new consolidating players, like the Waldencast SPAC or other aggregation-type platforms, could step up as acquirers. Or, he said, there’s always the public markets.
“People start to believe that they don’t want to wait for the strategic to show up anymore. They want to take destiny in their own hands,” Toure said.
FOR MORE FROM WWD.COM, SEE:
All the Beauty M&A Deals of 2021
Sephora’s Future Focus With Martin Brok
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