Last year was a particularly slow one when it came to beauty M&A on the back of consumers tightening their belts in Asia, early signs of weakening demand in the U.S. and a slew of leadership changes across the category. Now, another issue is in the mix: the rapidly changing U.S. policy on tariffs.
At the beginning of the month, President Donald Trump unveiled sweeping punitive tariffs on around 60 countries, sending the markets into a tailspin. On Wednesday, however, he stepped back, authorizing a 90-day pause — “and a substantially lowered reciprocal tariff during this period” of 10 percent. Still, he upped import duties on China-made goods to 125 percent, effective immediately.
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Against the ever-changing backdrop, in the U.S. at least, buyers and sellers remain extremely cautious, with sources telling WWD that a couple of processes in beauty are being reevaluated. That’s because beauty, in particular, is very sensitive to tariffs on China due to the sheer amount of packaging and other components stemming from the country.
“The tariffs have put everyone into a bit of a tizzy. There are some processes [in beauty] that we’ve heard that have been pulled already because people have to deal with the tariff situation,” said an industry source. “There’s the tariff situation and the cost side of the equation. But then the other question is are we going into a permanent recession? That’s a big question that we’re not going to know the answer to for a little while. People are still doing work, but we’re a little bit waiting for the shoe to drop to see what actually happened.”
Among the brands that reportedly came to market in the last 12 months but are yet to score a deal are Rare Beauty, Makeup by Mario, Merit, Kosas, Byoma and Jane Iredale, among others. Earlier this month, it emerged that Hailey Bieber’s Rhode joined those exploring deal options at a valuation of $1 billion. Rhode’s sales are understood to be around $200 million.
“However uncertainty is measured and recorded, it’s at an all-time high and uncertainty is the enemy of M&A,” Marissa Lepor, managing director and head of beauty and personal care at The Sage Group, said. “It typically leads to investor anxiety, lack of confidence in valuation methodologies. When people have uncertainty around the performance of a business or the long-term performance or how customers are going to behave, that’s when investors get more nervous about parting with their money. It doesn’t mean that they’re not going to be interested in opportunities, but it does create more uncertainty around the timeline for a deal.”
Nevertheless, some deals appear to be getting done, but much of the activity is occurring in Europe.
In a deal that closed before tariffs were announced, Unilever acquired British sustainable deodorant brand Wild for an undisclosed sum, while sources told WWD that bids have come in for two British brands, Medik8 and Byoma.
As previously reported by WWD, skin care brand Medik8, founded in 2009 by Elliot Isaacs, hired J.P. Morgan to explore deal options. Revenues are set to exceed $100 million in 2025 and WWD has learned that both strategics and private equity are circling the brand.
“Strategics are going to look at brands a bit more through a regional lens against the backdrop of uncertainty around tariffs,” said one source. “One way to think about it is where the bulk of the sales are coming from? Where is the product manufactured? Medik8 is a little bit of a special case, because most of the sales are in Europe. The product is made there.”
Masstige skin care brand Byoma is also said to have garnered interest from private equity, while British beauty brand Trinny London has hired a banker to explore funding options to fuel U.S. expansion plans, multiple sources told WWD.
“When investors invest in opportunities, they’re not investing in the performance over the next six months or even a year, they’re really investing in what the business is going to do in five to 10 years-plus,” said Lepor. “So if investors feel confident that the tariffs are a short-term obstacle to overcome, then it’s not something that prevents deals from happening at all. But I think they just need to wrap their head around what the impact is, either in the short term, but also in the long term, understanding how it affects cash flow, and then understanding if the businesses need to change their projections, whether it’s for this year or for future years, and if their projections for this year change, it could impact valuation for deals happening today.”
