The Changing Face of Beauty M&A

The Changing Face of Beauty M&A – How disruption has created a window for new investors

The Beauty & Personal Care (BPC) sector has long delivered strong growth, ahead of the wider CPG landscape. Its combination of emotional engagement, innovation, and high-margin categories made it an attractive one for investment. However, it has historically been largely inaccessible to other investors, dominated instead by a small number of Strategics using M&A to access growth and maintain portfolio relevance.

That dynamic is now shifting. Strategic buyers are pulling back, the M&A model that once propelled beauty is challenged, and in the disruption that’s followed, a new window is opening — one that may allow a different breed of investor to participate.

1) The status quo (2005-2019)

From 2005 to 2019, beauty M&A was overwhelmingly led by strategics:

Over 70% of deals were made by corporates
The environment was favourable: low capital costs, modest valuations, and small deal sizes
Buyers applied a repeatable playbook: professionalise operations, consolidate back offices, improve execution

This “spread bet” approach delivered returns, with the only real downside being saturated portfolios. For example, by the late 2010s, Unilever held 35% of the U.S. haircare market through overlapping brands.

2) The COVID-Induced Acceleration (2020-2021)

The pandemic disrupted the category — and temporarily supercharged it:

Consumers deepened their engagement with Beauty overall but also in specific pockets (e.g. skincare, clean/natural products)
Ecommerce and social media usage surged, levelling the playing field for insurgent brands in accessing consumers for both discovery and transaction
Trial and brand discovery increased, as consumers had increasingly more time to research and learn

As a result, relatively nascent brands like Rare Beauty, Hero, and Olaplex posted >100% YoY growth.

A burst in M&A followed:

Deal volumes rose 50% compared to pre-COVID
Average deal size increased by 40%
Valuations doubled on an EV/EBITDA basis

3) The Slowdown (2022–2024): A Model Breaks Down

This acceleration came to a halt as the dynamics that had fuelled it quickly changed:

Input costs rose, squeezing margins across all of CPG
Shoppers returned to bricks and mortar, leading to a slowdown in online but high competition, CACs therefore increased
Interest rates spiked, elevating the cost of capital

The deterioration in performance was stark, and Strategics recorded significant impairments against their assets (more than £10bn across ~30 beauty assets).

This slowdown in performance clashed with elevated valuations expectations. As a result, Strategics retrenched and deal volumes fell below historical norms.