Year In Review

Despite lingering uncertainty due to the coronavirus pandemic, beauty M&A had another busy year in 2022. Buyers and investors gravitated toward hair care and skin care, as well as anything with a self care bent. Brands with close-knit communities and digital know-how remained in high demand, and some companies opted for SPAC deals or initial public offerings in lieu of selling to a strategic buyer. The year also saw big beauty companies realign and revamp their portfolios with a variety of acquisitions, brand closures and divestitures, while private equity firms continued to compete for deals. With all those options in the market, valuations remained high, but were not always predictable, experts said.

“It was quite an exceptional year for beauty and for the market as a whole in terms of deal activity,” said Lindsay Carlson, managing director with William Blair.

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“Across the board from a transaction standpoint spanning M&A, private placements, SPACs and IPOs, we saw all the key parties jump into the game — from strategics who had cash on their balance sheets to private equity firms with a lot of dry powder, VCs [who] are looking to get in early — and really everyone has some great deals to show for it,” Carlson said. “The activity was really robust across skin care and hair care.” 

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Foundations from The Ordinary, Deciem’s most popular brand.
Photo courtesy of Deciem

In skin care, there were several major deals. The Estée Lauder Cos. acquired a majority position in Deciem, parent company of The Ordinary, with plans to buy the rest in a few years. Unilever bought Paula’s Choice; L’Oréal acquired Youth to the People; Procter & Gamble signed a deal to buy Farmacy; L’Occitane bought Sol de Janeiro; Coty signed a licensing deal with Orveda; Yatsen acquired Eve Lom; the Waldencast SPAC inked a deal for Obagi, and Galderma said it plans to acquire Alastin. 
The skin care category also saw investments in growing brands, including Carlyle’s Beautycounter deal, Eurazeo Brands investment in Beekman 1802, and investments in Hero Cosmetics and 111Skin. There were many smaller VC investments in skin care, too. 
“As we’ve started to get vaccinated, everyone was talking about the Roaring ‘20s and color was going to come back strong, but when you look at the M&A deals, all the action has been in skin care,” said Ilya Seglin, managing director at Threadstone LP. “The skinification going into other categories like hair, like body, that continues to play on the consumer side, and that seems to be playing out on the acquisition side. The comeback of color is materializing not to the extent anybody thought.” 
Makeup, which many in the industry predicted would have a renaissance in 2021, was slower to pick up, deal-wise. There was Shiseido’s divestiture of Bare Minerals, Laura Mercier and Buxom to Advent International, which picked up all three brands for about $700 million. The Waldencast SPAC bought Milk Makeup; AS Beauty acquired Mally Beauty; Katherine Power’s Merit raised money from L Catterton, and Beauty Pie and Glossier raised big VC rounds.

Monique Rodriguez, founder of Mielle Organics
Shaun Andru

In hair care, there were also multiple notable deals, with P&G’s planned acquisition of Jen Atkin’s Ouai, and Berkshire Partners’ investment in Mielle, among them.

For P&G, the Ouai deal marks an entry into prestige hair that the company has never had, and links it with power influencer and hairstylist Atkin, who has built out the brand into a full lifestyle assortment with a digitally connected community.
Berkshire’s investment in Mielle was one of the largest ever deals in the textured hair category, and positions the brand and founder Monique Rodriguez — who also built up a major digital community for the brand — for further growth and expansion across hair and other categories. Other notable hair deals include Madison Reed’s $52 million fundraise, which has allowed the direct-to-consumer hair color brand to continue to scale, and General Atlantic’s investment in hair growth line Vegamour. 
The biggest deal in hair care in 2021 was the IPO of Olaplex, which valued the company at nearly $16 billion and indicated the viability of the public markets for certain stand-alone beauty brands.
Perhaps some of the biggest deals of the year were in retail: The Hut Group bought Cult Beauty, giving it access to many beauty brands it hadn’t sold before, and Sephora acquired Feelunique, giving it access to the U.K. market.
For a full list of the year’s beauty M&A deals, investments and fundraises, see: All the Beauty M&A Deals of 2021.
Michael Toure, founder and CEO of Toure Capital LLC, said the buyers of 2021 were looking for brands with products that were functional and efficacious, or indulgent, and companies with a wellness and self care tie in, with an omnichannel strategy.
The pandemic has created a drive from founders to de-risk themselves, he said. “Everybody has been in the mindset to find liquidity,” Toure said.
The companies that have been able to profitably weather the pandemic are the ones investors are going after, Toure said.
“COVID-19 really tested the flexibility and reactivity of the management team, the strength of your supply chain and your cost structure, because if you’ve been able to manage the last 24 months profitably with a gross margin that is up, you’ve become all of a sudden a very attractive deal or investment proposition,” Toure said.
Going forward, Toure predicts many companies — especially those that got private equity investments between 2015 and 2020 — coming to market. With not enough big strategic buyers to buy them all, he said that it’s likely new consolidating players, like the Waldencast SPAC or other aggregation-type platforms, could step up as acquirers. Or, he said, there’s always the public markets.

“People start to believe that they don’t want to wait for the strategic to show up anymore. They want to take destiny in their own hands,” Toure said.
FOR MORE FROM WWD.COM, SEE: 
All the Beauty M&A Deals of 2021
Beauty Companies Weigh IPOs
Sephora’s Future Focus With Martin Brok

The supply chain was so problematic in 2021, it made its way into mainstream memes.Tweets from #NapDressNation, the fan club united around the lounge dress of pandemic fame — who Hill House Home founder Nell Diamond told of the shipping problems keeping them from their coveted dresses — read things like: “From now on when people ask why I’m not married, I’ll just say it’s a supply chain issue,” and “Sorry I couldn’t respond to ur text, supply chains are soooooo messed up rn.”
That’s certainly a first for the back office and once back-of-mind underground of consumer goods. But that’s how far-reaching the supply chain’s issues were — and are.
In short, the pandemic prompted factory closures, which led to delays and both supply and worker shortages, which led to port pileups and tied up (and thus, unavailable) containers, which led to soaring raw material and sourcing costs (at times, more than tenfold those in 2019) and congestion that contributed to serious delivery delays (at times, nearly triple the traditional time it takes). Shuttered factories made raw materials scarce, slow to market or sometimes entirely unavailable. Intermittent but ongoing factory closures aligned with COVID-19 case spikes, coupled with no great resurgence of workers and, unfortunately (or, fortunately?) still healthy consumer demand for stuff, continued to worsen the situation.

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The year’s goings on have also seen inflation soaring both in the general economy and online, with apparel prices rising a record-high 17.3 percent in November, according to Adobe data.
And the gaggle of tornadoes that recently ripped across parts of the Midwest and southern U.S. added only more bad news. That six Amazon distribution staff died in Edwardsville, Ill., when the warehouse buckled amid the storm was the gravest tragedy of all.
“We’ve seen delays along regional rail lines and operational impacts at warehouses. Local businesses were certainly impacted by these disasters; coupled with supply chains across the country already under strain with congestion at the ports and inland transportation, this will exacerbate those challenges,” said Kaitlyn Glancy, vice president of North America East for freight forwarding company Flexport. “This underlines how critical it is that, as we move through the current shipping crisis, we improve supply chain resiliency and visibility so businesses of all sizes can tackle challenges like these more effectively.”
Now the Omicron variant is adding yet another challenge. So far, the new variant, whose real impact likely remains to be wreaked, has already seen establishments shutter as cases start to spike.
The supply chain was “volatile” in 2021, according to Glancy, “because the challenges in global supply chains aren’t due to a single source but several across the breadth of them.” Those challenges won’t fade into the past when the clock strikes midnight launching 2022 — at this stage, there’s still no telling quite how far-reaching the ramifications will be.
Earnings call after earnings call in 2021 blamed the supply chain crisis for dampened profits and reevaluated guidance.

Gap Inc. said “acute supply chain headwinds” were at fault for its $152 million third quarter loss, though launching the Yeezy Gap hoodie staved off even more outsize blows.
Victoria’s Secret said in November that it’s expecting the fourth quarter to bring with it $100 million in supply chain disruptions. Martin Water, chief executive officer of Victoria’s Secret Lingerie, said, “To go into the season, we ordered around 200 million units of stock and 90 million of those 200 million are delayed. That’s 45 percent of our purchase requirement for the full season delayed.”
(When the cost to ship one 40-foot container from Asia climbed from between $1,600 to $2,100 in July 2019, to the $21,000 to $23,000 range by July this year, the financial impact on retailers, which certainly need more than one container to supply their stores and e-commerce platforms, was staggering.)
Resale, however, whose supply isn’t caught up in the traditional chain, took one great step toward greater marketshare amidst traditional retail’s 2021 entanglements. Rebag, for one, said its business tripled since the start of the pandemic (and the company just brought in $33 million to keep the growth going). This is due in part to an upward trend in pre-loved demand that began before the pandemic, coupled with firmed up sustainability commitments within pandemic year two, which has served to solidify people’s — and proprietors’ — reevaluation of their values.
One word to describe the supply chain in 2021?
In a word, Stanley Szeto, executive chairman of Hong Kong-based manufacturer Leverstyle — which produces clothing for clients from Shein to Theory — would call the 2021 supply chain a “tsunami.”
He described it to WWD as: “Wave after wave of shocks. Unavailable containers, skyrocketing shipping rates, factory COVID-19 lockdowns in South and Southeast Asia, fabric capacity shortage due to Chinese power outages.”
And that’s just naming a few of the issues.
“Uncontrollable” is the word Luen Thai CEO Raymond Tan would use for this year’s supply chain issues.
“At Luen Thai, we experienced partial/complete lockdown in Philippines and [in] Myanmar political unrest at 1Q21, Cambodia two-month lockdown at 2Q21, Vietnam lockdown and China power shortage at 3Q21 with huge impact on our material supplies,” Tan said of the Hong Kong-based manufacturer. “Throughout the year, logistics cost/time went up for both materials and finished goods, disrupting our operation and customers’ supply chain. All these are out of our control which we needed to manage in 2021 making sure our employees are safe with income to feed their families as well as ensuring our customers get their goods meeting the market demand; at the same time, we also need to invest into our future under this “uncontrollable environment.”

The type of investment needed to get companies through the year’s supply chain crisis, according to Synergies Worldwide CEO Guido Schlossman, was in supply chain management to minimize the impact of the disruptions.
“The connections along the supply chains have been challenged in the year 2021 by various factors such as scarcity of product and freight capacities, increase in cost (logistics, raw materials, etc.), volatile/unpredictable consumer demand, a change of consumer habits,” he said. The solution, he added, demands “better, integrated and coordinated supply chain management among supply chain partners to avoid or reduce disruptions. It needs technology or third-party supply chain managers or a more agile sourcing process and lean, decentralized, empowered organizational structure to facilitate this integration/coordination.”
At Li & Fung, group CEO and CEO of LF Logistics (the supply chain management company’s freight management arm) Joseph Phi is looking at the glass-half-full side of the 2021 supply chain.
His word to describe things this year? Pivotal.
“We experienced a perfect storm in 2021. The trifecta of trade tension, logistics logjam and pandemic uncertainty has wreaked havoc to our normal routine. The ensuing supply chain shock has now reached an undeniable inflection point. There are myriad organizations that lapsed into inertia believing that ‘this too shall pass.’ Well — they are still in a state of limbo,” he said. “There are then the limited few who chose to pivot by diversifying sourcing base, digitalizing processes, solidifying bench strength and incorporating sustainability in their business model. They have built resilience amidst adversity. And they now have gained a second wind and pulled ahead of the competition.”