Why beauty mergers and acquisitions are set to slow down

It may have come to your attention that there have been fewer beauty mergers and acquisitions of late. Gone are the boom days of 2016-18 when the flow of M&As seemed constant, and it appears there are a few reasons for that. 

According to trade publication WWD big companies don't need to make more acquisitions right now. Price tags for of-the-moment brands are stretching into the billions (see predictions for the Drunk Elephant sale) and businesses are starting to proceed with caution. Rumours of flailing sales and lack of customer loyalty among brands such a Kylie Cosmetics reveal the shine can quickly wear off what once took the industry by storm.     

Many companies that have made acquisitions over the past few years have also had to reassess the value of their brands’ assets. For example, since 2016 P&G, L’Oréal and Estée Lauder Cos. Inc. have revaluated Gillette, Clarisonic and Smashbox respectively.

There are still some deals on the horizon however. Industry sources told WWD that custom skincare brand Curology is exploring options, as is Lilly Lashes and the product side of Drybar. Elizabeth King reported this week that Revlon has hired Goldman Sachs to consider sale options for the entire business. Then there's the aformentioned Drunk Elephant sale that everyone is waiting for with bated breath. 

Smaller deals have been and will continue to take place too, investments like the one Dr. Barbara Sturm just received from One Luxury -- an early financial supporter of Pat McGrath Labs.

WWD predicts it will be another two to three more years before we see any more billion-dollar acquisitions of significance. Just enough time to see which companies, "come out on top of the current generation of indie brands."