Beauty M&A and funding 2025: Diverse buyers vying for a seat at the beauty table

Graduate Blog Post

Jo joined Heligan group as part of the 2024 Graduate intake. This is her first blog, where she’s applied the research and analytical skills she’s developed to analyse a market sector that she is particularly passionate about. We think that you’ll agree that it’s a fine piece of work.

 

Buyers eyeing beauty brands

2024 saw high deal volume in the beauty M&A and funding space, with both Private Equity and larger conglomerates purchasing recognised beauty brands. M&A and investment deals were up 15.1% from 2023, reaching 297 deals, as reported by Beauty Matter. H2 of 2024 saw deals up 34.3% Year-on-Year, setting strong foundations for the year ahead. We believe that 2025 will be even more dynamic, as there is expected to be an even greater diversity of buyers vying for a seat at the vanity table, pushing valuations up.

Private Equity has always had an eye for spotting and handpicking diamond companies among the rough, and the beauty sphere is no different. Sponsors will continue to spot innovative and market-disruptive beauty brands and compete to gain a slice of the (Beauty)Pie in 2025. When combined with an economic environment that’s more favourable to M&A activity due to falling interest rates we’re likely to continue to see higher valuations for innovative beauty players. 

 

The lipstick indicator: Resilience of beauty across economic cycles

The often-cited Lipstick Index, coined by Estee Lauder’s Chairman Leonard Lauder in the early 2000s, highlights how in economic downturns, as disposable income falls, lipstick purchases increase. Such a phenomenon would support the thesis that skincare and beauty brands should have stable revenues across cycles, in contrast to other consumer product counterparts. We’ve seen evidence of this, as the market maintained a 2% CAGR between 2017 and 2022 despite a turbulent macroeconomic downturn. As we transition into a more stable market this CAGR is expected to rise to 7% from 2022 to 2027, reaching $590 billion globally by 2028. This resilience lays the foundations of why beauty brands have been, and remain, attractive for both strategic buyers and Private Equity investors. 

Whilst the resilient nature of beauty forms the foundations of beauty industry valuations, brands can further maximise their attractiveness to potential acquirors, and achieve a higher multiple, through additional growth levers. 

 

Creating loyal repeat customer bases through a double-pronged digital-physical strategy

No longer is having a bricks-and-mortar store, or website, or both, enough. Brands need to create an interwoven digital-physical two-way strategy, to ensure a strong repeat customer base.

Across the beauty and fashion space, it is smaller brands, rather than conglomerates’ brands, who have had the creativity and innovation to revolutionise how consumers are shopping. Their disruptive double-pronged digital-physical presence and sales channels have helped them to foster a strong community that cultivates a loyal, repeat customer base. 

One only has to look at the four-hour long plus queues at Belgravia’s Rhode pop-up, or Covent Garden’s Rare Beauty pop-up to see brands are nurturing a community, and driving sales up further. In the UK brand space, Jenna Meek and Jess Hunt’s Direct-to-Consumer brand Refy, known for their iconic Brow Sculpt which creates the “bushy-yet-sleek” brow look, took this a step further by taking loyal customers to Mallorca last summer, and recently hosted events such as Pilates with Blok to celebrate their new skin collection. Whilst only for a select number of customers, this may appear small, but in fact it helps to develop a stronger, more loyal, customer base. The knock-on effect of activities such as these is that businesses that can clearly demonstrate and articulate their level of repeat customer engagement are commanding a higher Enterprise Value in the M&A and funding market.

Sabrina Sadiq’s luxury fashion resale site Luxury Promise gains significant traction through their livestreamed fashion show displays on their website and Instagram, providing an interactive and multidimensional way to shop, and significantly contributing to their 450% sales growth between 2019 and 2022. Their last funding round raised £8 million from investors including ProVen VCT, and independent influential industry leaders including Francois Delage (Former CEO of De Beers) and Pierre Denis (Former CEO of Jimmy Choo). 

It's not just ‘new’ brands, or those without their own physical stores, which Sponsors are interested in. Well-established but innovative companies, with a loyal customer base and unique in-store experiences are also on Private Equity’s radar. Indeed, L Catterton, through their flagship beauty fund, acquired a majority stake in KIKO from the Percassi Family in April 2024. KIKO combines high quality make-up, at a reasonable and accessible price point; a unique combination in today’s world. This investment should help KIKO to scale and expand into new geographies, including the US. 

 

Personalised and customised formulations are disrupting the consumer marketplace 

Data rich and tailored beauty products have been shown to underpin higher valuations and generate Private Equity investor demand. Take  Function of Beauty as an example – a strong leader in the customisable and personalised skin and bodycare space with products at a reasonable price point. Co-Founders Dossa and Kaplan created a beauty quiz to help uncover customers’ specific skin-, hair- and body- care goals, whilst Co-Founder Maciejewski created the customer production system to fulfil each individual customer’s goals. It’s no wonder that L Catterton made a minority investment of $150 million back in November 2020 to help the forward thinking brand to “accelerate growth”. Similarly, Horatio Cary and James Mishreki’s Skin+Me creates personalised prescription-strength skincare products based on individual needs, and raised £10 million in their Series B funding round led by Octopus Ventures and JamJar Investments. 

Therefore, where possible, companies should be looking to add an element of data-driven sales and product development to maximise their attractiveness to prospective buyers and investors.

 

Conglomerates catching innovative players’ proprietary intellectual property

Conglomerates have a history of acquiring to gain valuable IP and innovation capabilities from smaller nimble players. In February 2024, Unilever Prestige completed its acquisition of premium biotech haircare brand K18 for an undisclosed amount. The acquisition gave Unilever access to K18’s proprietary Peptide molecule IP, an asset that Unilever Prestige CEO Vasiliki Petrou thought would “supercharge growth in Unilever’s prestige division”. 

Moreover, Spanish-head quartered conglomerate Puig acquired a 65% stake in Dr Barbara Sturm in January 2024 for £234m, valuing the clinically driven brand at an Enterprise Value of £361m. This German premium skincare company is founded on strong molecular science based principles, which remains at the core of their brand identity and strategy, with Dr Sturm being the creator of the renowned Vampire Facial, and MC1 cream, a moisturiser that uses the patient’s own white blood cells to heal the skin. This acquisition helped Puig diversify its brand portfolio, which was previously heavily weighted towards fragrance and cosmetics, ahead of their July 2024 IPO. 

Already in January 2025, we have seen Jay Sammons and Kim Kardashian’s PE firm SKKY Partners make a minority investment in Eva Alexandrides and plastic surgeon Dr Yanis Alexandrides’ 111Skin. Famous for its proprietary NAC Y2 ingredient complex, which promotes collagen production and improves elasticity, the premium Harley Street brand with strong clinical foundations is a favourite with celebrity clientele. The investment will enable 111Skin to expand “its customer base in key markets, including North America and Asia” and further supports that innovation and intellectual property continue to be desirable characteristics.

 

Gen Z and the clean beauty revolution will drive further growth

Much of the new growth is with Gen Z, and the increasing consumer demand for skincare and makeup created from natural ingredients, ingredients which are cruelty-free and non-toxic and vegan, and sustainable packaging. However, conglomerates’ well-established brands aren’t resonating with Gen Z and the “clean girl” drivers. Changing a brand’s identity from heavy, defining makeup to the “clean girl aesthetic”, or completely changing the formulation of products, takes time and is not always successful credibly. Thus, in order to maintain their foothold and market share, conglomerates have become motivated to grow inorganically, acquiring these new future-driven players and adding them directly into their portfolios.

Indeed, in June 2024, Estee Lauder acquired the remaining 24% stake in Deciem (the parent company of The Ordinary) for a total of $1.7 bn over its three tranches since it started investing in the brand 7 years prior. Fabrizio Freda, CEO of Estee Lauder at the time explained, “As a digitally native organisation with a highly engaged following among millennial and Gen Z consumers, Deciem helps to strategically expand our skin care portfolio, and we believe there are many more exciting growth opportunities ahead.” Clearly, the larger players are watching in awe and realising they need to step up their game to remain relevant, and captivate Gen Z, which is where much of the new growth is.

Private Equity is also tapping into clean beauty brands. TSG Consumer saw the value in Marianna Hewitt and Lauren Ireland’s clean skincare brand, Summer Fridays, and made an investment in July 2024, with Prelude Growth Partners simultaneously exiting. This iconic and disruptive brand has created a community cult following across socials, with the iconic Jet Lag Mask, a deep and rich moisturiser, a staple in travel beauty and lifestyle influencers’ travel flat lays. The investment will help Summer Fridays to continue to build their brand, further expand their products, and gain even greater geographical reach. 

Moreover, brands should not only look at the current “clean aesthetic” trend, but should also take heed of upcoming TikTok beauty trends, notably the Korean and Japanese skincare demands in the West. Indeed, North Castle Partners acquired a minority stake in Glow Recipe, a vegan and cruelty-free brand anchored in Korean skincare philosophies, and we expect more investment in Asian brands from the West. 

 

Valuations and the price of beauty

Founders should take great consideration when deciding to sell to strategics or PE. Choosing a sale to a strategic will enable a “clean exit”, and founders can realise their value immediately. Founders who choose a PE exit have the opportunity to receive significant cash out on day 1, whilst sharing in future upside. However, one should be cognisant of the very fact that earn out is achieved based on the future performance, and so the product should be of high quality, or the brand name should be strong, and the founder should trust the Private Equity firm to have the right expertise in the sector to deliver on the growth plan. 

Indeed, throwing a spanner make-up brush in the works, in recent years we have seen founders buying back their stakes, likely as they could buy them back cheaper than what they sold it for, or they did not hit their earn-out targets. In April 2024, Vita Liberata’s founder Alyson Hogg bought back her brand from Crown Laboratories for less than $12 million. She reportedly sold it to Crown Laboratories in 2018 for more than $30 million, when retail sales were $62 million, but sales fell sharply to $37 million by 2024. Meanwhile in January 2025, Stella McCartney bought back her 49% stake in her eponymous brand from LVMH. February 2025 has seen Huda Beauty buying back its ownership interest from TSG Consumer, which the PE house entered into in 2017, although admittedly this occurred simultaneously with the sale of Kayali to General Atlantic to help power the next phase of growth as a leading global fragrance innovator. 

Moreover, buyers from adjacent sectors are looking to Beauty’s assets in terms of scientific innovation, technological capabilities, and marketing strategies. Bic acquired Tangle Teezer in December 2024 for total consideration of £165 million with the aim of enabling Bic to gain exposure to a fast-growing business and assist in distributing the brushes globally. 

On the strategic front, L’Oreal and Unilever are expected to be actively acquisitive. However, given Estee Lauder’s reported loss and lay-offs, they are unlikely to engage in acquisitions, and may be contemplating divesting their portfolio to get back in the green.  

It’s undeniable that smaller beauty players will continue to disrupt the way consumers shop in 2025, and our spotlight should help more founder-led brands glean inspiration in how to enhance their brands even further, highlighting and making them even more attractive to buyers. When these factors are combined against an economic backdrop of falling interest rates and an expanding buyer population at the beauty table, it becomes difficult to believe that the beauty M&A market will be any less glamorous for sellers in 2025. Watch this Space(NK).

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