It was certainly a good run and it was bound to happen, but we’ve started to see the beauty bubble deflate. Billion-dollar deals have slowed, although this quarter saw a couple, with General Atlantic taking a 60% stake in Morphe Cosmetics at a $2.2 billion valuation and Colgate acquiring Filorga for $1.69 billion. Angels, Venture Capital, and Private Equity are making smaller investments and placing their bets on the next crop of indie brands that could be on the path to unicorn status.
While some are still talking about the “retail apocalypse,” others are seeing new life in retail as D2C brands look for new ways to acquire consumers, like the Le Tote acquisition of Lord + Taylor from Hudson’s Bay Company. Communities and causes are giving birth to new retail ventures like NakedPoppy and Grove Collaborative.
Henkel was particularly active this quarter, taking a majority stake in eSalon tapping into the customized at-home color market, and made investments in German start-ups Purish and Youtiful as part of a strategic plan to strengthen its digital go-to-market business model.
Gender-Neutral Leaning Male: A group of niche skincare brands positioned as gender-neutral but male leaning has seen a flurry of activity. Ursa Major and Hawthorne raised Series A funding, Huron and Bravo Sierra raised seed rounds, and Oars + Alps was acquired by SC Johnson. Could the next generation of growth in the men’s category come from skincare?
Influencer Brands: Many influencers are jumping into the brand side of the beauty equation, and money is following. Laguna Beach alum Lauren (Lo) Bosworth’s Love Wellness raised a $4 million Series A, Unilever Ventures backed clean influencer brand Saie, Deepica Mutyala raised a seed round for Live Tinted, and Summer Fridays landed investment from Prelude Partners.
CBD Greenrush: This quarter saw more retailers opening their assortments to CDB beauty and wellness along with both Big Commerce and Shopify launching platforms for CBD brands, solving transactional pain points for these brands. While the category had been flooded by indie brands, some leaders have begun to emerge through investment and acquisitions. Cronos Group acquired Lord Jones for $300 million, Canopy Rivers invested in High Beauty, NewH2 made a strategic investment in Bod Australia, and LB Capital invested in Herb Essentials.
Supply Side: Bigger is better seems to be the ongoing theme on the supply side as consolidation continues further down the supply chain. As price tags for beauty brands have hit the stratosphere, Private Equity and Venture Capital firms have turned to the supply side of the industry for deal flow.
Media Moves: While the media landscape has been struggling, this quarter saw Business of Fashion raise a Series B funding round led by The Financial Times, and a number of publications change hands. W was just sold to the owner of Surface Media, Brides was sold to DotDash, Bustle Digital Group also recently acquired Nylon. Meredith Corp. acquired most of Time Inc.’s publications, including InStyle. And the quarter ended with Vox Media acquiring New York Magazine.
In The Works:
- Last quarter, rumors of a deal between Kylie Cosmetics and Coty have yet to come to fruition while there are rumblings about Coty planning to sell between $500 million and $1 billion in assets as part of a turn-around strategy.
- Curology, which is said to have about $100 million in sales, has hired Financo.
- Lilly Ghalichi’s Lilly Lashes has hired Intrepid.
- Dose of Colors, which is said to be at about $80 million in sales, is rumored to be exploring deal options.
- Drybar is also said to be exploring options, but only for the hair products side of the business.
- New York-based Mana Products is rumored to have hired Guggenheim to explore sale options.
- Revlon has hired Goldman Sachs to help review strategic alternatives, including the sale of all or parts of its business. According to Bloomberg, significant amounts of the company’s debt is maturing in 2020, adding motivation.
- Some think there may be more acquisitors in Colgate’s future as they build a division around the initial PCA and Elta MD acquisition in 2017. The business actively bid and ultimately lost on Elemis before acquiring Filorga for $1.69 billion in July.
Inside the BeautyMatter Q3 Report:
- 86 transactions captured across the beauty and wellness landscape in this 123-page report.
- Tribe Dynamics’ analysis of five brands’ EMV and influencer marketing strategies.
- Compilation of Q3 transactions with full transaction insight.
- Easy-to-reference chart including transactions by category with high-level details and the financial players involved.
We’ve put in the time and done the work for you. Purchase the BeautyMatter Beauty Deals: M&A Transactions Q3 2019 here.