Global management consultancy Kearney has released a new study highlighting how changes in marketing, consumer preferences, and digital shifts have created a new mergers and acquisitions (M&A) landscape for the beauty and personal care industry, a historically attractive target for M&A over the past several decades.
 
The findings were developed from industry data, analysis, and close observations as well as a survey of senior industry executives who focus on M&As around the globe and senior investment professionals responsible for setting and executing M&A strategies.
 
“After many years of being an attractive target for mergers and acquisitions, the beauty and personal care space is facing major changes in M&A deal sizes, particularly in the mid-range sector,” said Pauline Mexmain, a senior manager in Kearney’s consumer practice. “The lower multiples offer unique opportunities for both financial and strategic acquirers who are considering investing, while putting pressure on VC and PE-backed companies.”

Overall Transaction Volume is Expected to Grow

The study found that 89% of responding industry leaders believe that business planning and consolidation M&A volume will increase over the next two years, driven by the limited growth of the existing brand portfolio and accelerated by the expectation that Gen Z, which drives 30% of the beauty industry’s growth, does not always favor legacy brands.
 
However, Kearney’s analysis reveals that the industry’s M&A track record is far from positive, with many deals delivering limited value for shareholders. The sector is also facing fundamental changes, and M&As are an important instrument and catalyst enabling brands and investors to adapt and strengthen their portfolios. Combined with high interest rates and volatile corporate valuations, this has created an environment in which a clear M&A strategy is paramount.
 
Recent acquisitions in the beauty and personal care landscape include:
 

• L’Oréal Acquires Aesop from Natura &Co.
• The Estée Lauder Companies Acquires Tom Ford
• Oddity Acquires Revela
• Hello Bello Acquired by Hildred Capital Management

 
“Given financial market headwinds, the year ahead will undoubtedly present a window of opportunity for experienced acquirers,” said Gavin Meschnig, Kearney partner and expert in the beauty and personal care space. “In the current environment, decisions about portfolios will separate the winners from the losers. Leading beauty and personal care players will move decisively to adapt their portfolios in an agile way.”