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Beauty dealmakers looking for lasting brands

May 23, 2023
illustration of loose pink makeup powder in shape of a dollar symbol next to a makeup brush

Illustration: Tiffany Herring/Axios

Beauty brands looking for funding or a buyer must be able to demonstrate long-term value via multiple growth channels, dealmakers at the Beauty Independent Dealmaker Summit in New York said Monday.

Why it matters: The beauty market is projected to reach around $580 billion by 2027, and the industry has been relatively resilient in the face of the recent economic downturn.

What’s happening: Generating good sales isn't enough to guarantee success, says Pascal Houdayer, the CEO of Orveon Global, the private equity-backed beauty group behind Laura Mercier, Bare Minerals and Buxom.

  • Brands should be moving into international markets, expanding their categories, or accelerating innovation, he says
  • "That basically makes it very interesting after five years, when you exit,” he says

Zoom in: It all boils down to what makes a high-value asset, says Andrew Ross, a venture partner at XRC Ventures. His main questions:

  • Does it have global reach? Does it have an equity on which you can build? Do you have differentiated tech, versus just a marketing story? Do you have repeat purchases? Do you have a good cost of goods? Can you expand it into another category?
  • Formula is important, he adds — especially who owns it, whether it’s scalable, and whether the brand has all regulatory ducks in a row.

Zoom out: Dave Smith, the global head of M&A, strategic investments and licensing at Estée Lauder, says he looks for brands that demonstrate an ability to be nimble and "wise in terms of meeting consumers where they are."

Of note: Estée Lauder made a big bet on a well-known brand, acquiring Tom Ford for nearly $3 billion late last year.

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