Revlon's bad bet

When Revlon acquired Elizabeth Arden in 2016 for $870 million, it planted the seed of its own demise.

Why it matters: The beauty group's bankruptcy might be particularly bitter for Ron Perelman because it's based, in part, on picking the wrong target.

Details: The deal saddled the company with hundreds of millions more in debt (it was financed with a $1.8 billion term loan) and a faded brand that generated breakeven EBITDA.

• While some cost-saving synergies were realized early on, it tasked Revlon with turning around not one, but two tired brands.

Between the lines: French cosmetics giant L’Oréal, however, made a different bet, acquiring NYX Cosmetics for a reported $500 million in 2014.

• And E.l.f. Cosmetics was bought in 2014 by TPG Growth for between $200 million and $300 million. The PE firm then took the company public in 2016.
• Both NYX and E.l.f., given their respective deals, would have been in play for Revlon too.

Our thought bubble: Back then the conglomerate had the financial wherewithal to not only buy something with fresh branding, growth and cash flow, but likely at a cheaper price too.

The bottom line: Revlon might be telling a different story today if it had either passed on dealmaking to invest in a makeover of itself or acquired a startup that understood the new consumer.

• Acquisitions aren't always about what you buy. They also can be about what you didn't buy instead.