Inside Beauty’s 2026 M&A Pipeline

0:07Hello and welcome to The Debrief from the Business of Fashion, where each week we delve into our most popular BOF professional stories with the correspondents who created them. I'm senior correspondent Sheena Butler-Young. And I'm executive editor Brian Baskin. 2026 is barely underway and the beauty industry is moving fast. You may have already seen the Business of Beauty's recent scoop that Estee Lauder is preparing to sell three of its best known brands. And that's just the tip of the iceberg with what's expected with deal making this year. The Business of Beauty executive editor Priya Rao is here to break it all down.

0:40Plus, we'll get into how drunk Elvin is moving past that whole Sephora tweens thing. Priya, welcome to The Debrief. Hi, guys. Great to be here. So, Priya, why don't we start with your big scoop last week, which is that Estee Lauder is potentially putting a couple, well, more than a couple brands on the market. Are they really getting ready to sell Too Faced, Smashbox, and Dr. Jart? Absolutely. Last week, I heard from two sources and actually more since I reported that story that Lauder is trying to package these brands in order to get the best outcome. You know, I think individually, these brands don't have add a lot of value to a potential acquirer.

1:20And Lauder is in cost cutting mode and they're also trying to be more relevant culturally. So they need more brands in their portfolio to speak to the consumer, to be more digitally native. And these brands have been slow to connect with customers. Smashbox, Too Faced, and Dr. Jart were bought during the 2010s buying spree of Lauder. And obviously, the business that they wore back then is not the business that they are now. But can you explain why these make sense as a package? I understand the idea that if you put them together, a bunch of small brands together, maybe you get a higher price for them.

1:53But is there something that connects these brands that would make them interesting as a group to a buyer? Not exactly. I mean, Smashbox and Too Faced are both makeup brands. They're both more of the high glam, very colorful look that we were used to before, you know, Haley Bieber and Rode came along and made us all clean girls. But Dr. Jar is a Korean beauty brand. And, you know, one of the first successful Korean beauty brands in the market. And the fact that it's not doing well right now during K-beauty's second wave is kind of wild to me. But again, I think this is more about price than it is about synergies.

2:27A few years ago, Shishado offloaded its entire cosmetics business and set for NARS to Advent International and created Orbeon. And that was kind of the boilerplate I think that Estee Lauder is going off of now. We should talk about that price. I mean, you reported low nine figures, right, for all three brands, which is way less than they paid for them, right? Absolutely. I mean, in the heyday, they paid$1.45 billion for Too Faced. Just for Two-Faced.

3:26things off. What's interesting is you made a good case as to why they would want to sell these three brands, but we know that this gap between being for sale and actually being sold is widening in beauty. So like, what does a potential acquirer look like? Who's going to want these brands? I'm not sure. I think the best outcome is again, another private equity firm who thinks they can like squeeze out value from these brands. Oh no, private equity. That's always good news. Sorry. Well, private equity is seemingly like the only option for some of these brands. You know, The strategics, like I said, are selling off businesses left and right.

3:59They're trying to winnow down their portfolios. The market isn't as hot as it once was. So in some ways, it's the best outcome. But I will say that it's, again, going to be the situation of squeezing out value versus creating value. I think of all the brands in that portfolio, I mean, there is something to be done with Dr. Jart, especially, like I said, with K-Beauty's second wave and creating a brand that's more like culturally relevant and also like more innovative in terms of product. I don't know if you guys saw the rubber mask that just came out at Dr. Chart and they're pretty terrifying versus something that I would actually want to wear and use.

4:34But Too Faced, there's a lot of value. I mean, it's one of the best selling mascaras in the country. And so if they're just able to create a portfolio around that, that people want to buy, I think, I think it could be interesting. So you're saying Estee Lauder, Estee Lauder bought these brands back in the 2010s when they also needed some fresh, youthful cosmetics lines to supplement their more established offerings. And it seems like they're right back where they started 15 years ago, right? I mean, why do we have confidence that they're going to be able to do this better now than they did back when they bought Too Faced in the first place?

5:08I think that there is an indicator that Estee Lauder could do this right. And that's because of what they've done with Decium and The Ordinary and La Labo and some of their fragrance purchases. Decium was kind of structured like Dostradart. They invested in small, and then over time, they invested in greater, and then they bought the whole brand. That is one of the businesses that has continued to do well. I've heard that Decium sells more skincare products than all of Estee Lauder's other skincare brands combined, which is insane. And Lalavo is also continuing to be on fire for the brand, even though Santal 33 has been around for, what, 15 years now?

5:44I'm going to be keeping my son tall 33 till the end of time. It's never going to get old. Sheena's a diehard customer. And actually what's interesting is if you, I mean, this is inter office semantics, but these two businesses are the only two leaders that directly report to CEO Stefan de la Faver. And so, you know, they are running autonomously and they aren't kind of dealing with some of the shields and barriers that you have when you're at a big conglomerate. So there's almost a new Estee Lauder and there's an old Estee Lauder. And it seems like one of them is doing really well. And one of them maybe has some things to work out still.

6:23Yeah, I think that the flagship brands are doing better. Estee Lauder proper, of course, Clinique with their move on to Amazon. And then, you know, Mac has made some good moves in terms of how they're marketing. But they still have some things to work out, just like you said, Brian. We'll be back with more of The Debrief right after this.

6:48So let's talk a little bit about what's separating desirable from buyable in the broader beauty market. I know there are some areas that are on fire right now. So hair care is, fragrance is, and then body care is. Talk a little bit about that, Priya. Well, I think what's happening here is, you know, there's so many makeup brands in market. You know, last year and the year before, we started seeing all of these artistry brands like Makeup by Mario and then some other brands that have been around like Kosas and Merit really kind of go to market and see, you know, what they were going to find and if they were going to find a buyer.

7:21And very quickly, what happened was that there were so many color brands on the market that, you know, what was happening was that people were waiting for the next great one. People were waiting for Rare Beauty. People were waiting for Westman Atelier. And so they weren't willing to make a bet on any of these brands until the full slate was out. But then that left these other brands in market on and off for like over a year. So the longer that they're sitting in in markets, kind of like a house, you know, like, why am I going to buy this house at a premium price point when I can be buying at a discount and I should be buying at a discount.

7:56It actually sounds a little bit like how people use dating apps, right? They're always thinking there's someone better coming along with the next swipe, right? Totally. There's so much optionality and, you know, it's not just optionality in terms of color cosmetics and makeup. You know, I think it's hard in makeup because you have to have so many skews. You have to have so much innovation. You know, there's always new trends to jump on. There's always virality to think about. And so it's a complicated business. It's probably the most complicated in beauty, but it's the biggest part of the market.

8:25So we can't ignore that. And we just talked about Two-Face, which is a cautionary tale here, I guess. I mean, they were the brand in the 2010s. They still have a successful hero product and they're worth maybe a fifth or less of what they were acquired for, right? Exactly. Sheena, you mentioned fragrance and hair care. I think these are smaller parts of the market, but fragrance has been growing really fast. And I think everybody is realizing in their portfolios that they have a whole. I think that all of these other businesses, hair care, body, and fragrance is more incremental to a strategic.

8:57And that's where I actually think that strategics are going to play. I mean, I think private equity is trying across the board. But if you want L 'Oreal, if you want LVMH, if you want Estee Lauder, I think if those are your targets, I think you have to be in categories that are going to add incremental value versus something that they're still trying to figure out. And it's and it's complicated. What about those hair care brands that are booming, though? Like, can we throw some names out? Like, what are the desirable hair care brands in the market right now? And also in fragrance? Like, what are the big ones?

9:27Well, Sheena, you know, my full coverage comes out tomorrow, my column. So I don't want to give everything away. But two of the brands that are really big right now are Amika, which has the number one or number two dry shampoo at Sephora. And they just went into Ulta and Ulta has a huge, huge hair care business because of their back bar program. So we're going to see them really explode, I think, when they, you know, do the Sephora Ulta dance. And the other one is actually really interesting. It's Not Your Mother's Daughter. It's a mass hair care brand. It's been around for a while. People have looked at it in the past and questioned its longevity.

10:04And yet here we are like 10, 12 years later, and they're still around. And I think Not Your Mother's is a little bit more nuanced. It's not a brand for me, but I think it's for the girl who, or guy who has just graduated from college, who's willing to spend a little bit more on their hair care routine and it's all styling and texture. So they haven't even played in shampoo and conditioner yet. And in mass hair care, that's where you play to make the big bucks. So any strategic has that going forward for them. That's where they could take them and they can get very, very big. It sounds like what you're talking about is mostly categories like hair care, maybe body skincare that are smaller than cosmetics, but a good add on.

10:44But fragrance is kind of its own beast, right? I mean, that market has just been booming for so long that it's becoming a real factor with even the strategics, right? Absolutely. And again, I don't want to give away all the full coverage tomorrow. You guys have to read it. That's Priya's newsletter. Please subscribe at businessoffashion.com. Something that you really have to pay attention to is Parfums de Marly. Just a couple of years ago when I started this top M &A target list, Parfums de Marly was looking for a strategic sponsor and they got it in Advent International. Now we're talking about like what, two or three years later, and now we're thinking it's going to go to a strategic.

11:21I guess before we get into who's going to buy them, can you tell us a bit more about the brand? I mean, why are they the face of fragrance M &A this year? Well, they're a high perfumery brand, an expensive brand. It's niche. It's not one of these mass brands that you're going to find. And, you know, Ulta, Sephora, it's a brand that like still has a lot of what people were attracted to with Byredo or LaLavo. And so I think people are really attracted to that. They've been able to diversify their merchandising assortment. They're not just one hero product anymore. And I think what's really attractive is that their business has just been incredible.

11:57I would love to share numbers, but then you guys have to read full coverage tomorrow. So there's this idea in beauty that there's a lot of chatter as we've just proven. And then the market is very slow to move. Before we move on to Drunk Elf, and I want to hear from you, Priya, what would it take in the next six months for the buying and the selling to actually pick up? Not the chatter, but the follow through. Again, I think it's about the brands. I think people will move with the right brands. Last year, we saw Rode get picked up in May. We saw Space and K picked up by Ulta in the summer. And then we saw Dr.

12:31Squatch get picked up by Unilever. So I think it's just about the momentum. Somebody has to move first. And I think it's the right brands. I mean, I don't know, like one of the things that we found out last week was by Makeup by Mario. You know, they have been in market. They've been trying. They have a new, they're going to be, they're looking for a new CEO. So whoever's buying that brand is probably not buying it right now because they don't have leadership. The same thing happened with Glossier a couple of years ago. Their CEO left at the end of last year. They have a new CEO, Colin Welch, who's supposed to be incredible and sold way to Procter & Gamble.

13:07But nobody's going to be looking at them this year, even though they were active two years ago or a year and a half ago, because they don't have the leadership. So I think we have to think about, do all of these brands have the pieces? Are they profitable? Do they have top line revenue? Is there room to grow? And do they have a strong team to make this deal happen? So I called Two-Faced a cautionary tale about M &A earlier. But Drunk Elephant, which is our final topic today, is probably the ultimate cautionary tale because they were acquired by a strategic for something like$900 million a few years ago.

13:45And they've had a pretty rocky run of it since then. And it looks like they're trying to turn a page now. And Priya, you had the details on that. Tell us what has been going on with Drunk Elephant and why they needed a new look. Drunk Elephant is a crazy story. I mean, Tiffany Masterson created the most desired, most culty clean beauty brand when clean beauty was not even a thing and became one of these Sephora darlings. You know, they exploded. besides Tatcha. I don't think that there is an example of a brand that was built by Sephora, led by Sephora, and then got acquired for$845 million in just around 2019.

14:28That wasn't that long ago. And that was at the height of the market. So she created something that was new and different. She was ahead of the time in terms of being a founder who was evocative, who was, you know, willing to tell it like it was. She was a little bit sassy. Obviously the name Drunk elephant was something that people were really interested in. And, you know, she had this really colorful, cool packaging, but around 2023, when the Sephora tween thing happened, it got really, really convoluted because even though there was no confusion at the beginning, even though like we knew who drunk elephant was for, we knew who glycolic acid was for back in 2013, somehow a decade later, tweens thought it was for them, you know, and I think it was really about the colorful packaging.

15:14And it wasn't just the packaging. It was just the whole marketing campaign. There was color everywhere, you know, in gift bags and gift sets on social media. And it really kind of signaled to teens and tweens that this line was for them. And at the same time, brands like Bubble and Bioma were coming out. And they were also trying to use that strategy of color to signal that, hey, we're a young, cool, new brand. But for Drunk Elephant, what it did is that all these teens and tweens came and there was all this conversation around it should tweens be using skincare for 40 year olds and then the 40 year olds left and you know honey is that Tiffany started this line when she was in her 40s and it was really for gen xers and you know customers who were looking for effective products at like half the cost they were getting from like la mer or la prairie so let's fast forward to today they're in the middle of a revamp.

16:09They're trying to get back their original customers who were alienated by all of this, you know, the color and the gen alpha piling into it. And then all the conversation around whether or not it was for them, whether it was safe for them, all of that drama, they're now trying to build it back. What does that revamp look like? Well, I think before we start there, I just want to say that there were other issues with Drunk Outfit. They had major inventory issues because they had this product, these bronzing drops that sold out and that were super viral with the teens and tweens and also older women.

16:37And they also never clarified that they weren't for teens and tweens. So like letting the conversation just go and roll was a detriment to them. As for now, they're really paring back what their look and feel looks like. The bottles are the same. The packaging is the same, but there's not color everywhere. The images now are models who are forward facing, you know, simple imagery that you could probably find at Bobby Brown's Jones Road or Ilya. So it's much more mature and it's not young girls. I think they're also trying with their new tagline, which is please enjoy responsibly to appeal to like the over 21 crowd or really the over 35 crowd, because that tagline is a little bit cheeky, just like Tiffany was at the very beginning.

17:24And it's a nod to the alcohol industry and it's a nod to adult activities. You know, I think it's interesting because I don't know if it'll be enough right now, But I think over time, hopefully for their sake, that the customers will come back. And there are signs that the brand is making progress. Earlier this year, their sales plunged 65%. And just by getting the inventory a little bit more on track, sales were only down 49%. You know, that's not perfect. But they are coming out with new brand innovation. They are trying to speak to a customer. So I do think that they are making roads that will be positively impacting the brand.

18:02But it's hard because they did explode. And when these brands explode, the only way when you're number one, the only way to go is go down. I think the larger issue for me is like I think the tagline is genuinely very clever. I mean, sort of making it sound almost like you're buying an alcoholic drink or something. Um, but I do worry whenever a brand with a really distinct identity starts putting a lot of beige and muted colors and sort of stripping away what made them distinctive in the name of rebranding. I always worry about brands when they hit that stage in their, in their life. Well, I think because they're not totally redoing the packaging itself, which is something that is very iconic to the brand that that's like a saving grace.

18:49They're not abandoning everything. They're just trying to make a point of, you know, who the product is for. And that's especially evident by the kind of models that they're using, that they're going after clinical results, that they're reinforcing like, you know, their trials, all the things that make them, them, you know, active ingredients. And they're really messaging that on all their products. You know, some of their sub tag lines is like skin so good. It should come with a warning or, you know, please moisturize responsibly. And so I think they are going to be driving home this point over and over again.

19:24So I think that's as good a note as any to end on. Priya, thank you so much for joining us. I think the 2026 M &A Beauty Space will be one to watch this year. Thanks so much for having me, guys. It was so fun. In closing, I'd like to give a shout out, by the way, to two amazing UNC students that I met on Friday who are the Debrief's number one fans. I met them at the NRF Student Foundation event, and they were lovely. Please be sure to check out Priya's newsletter, full coverage at businessoffashion.com. Her reporting on all things beauty, as well as other stories, are available to BOF professional subscribers only, and you can find the links in the episode notes.

20:03You've been listening to The Debrief, produced and edited by Olivia Davies and Eric Rhea. I'm Sheena Butler-Young. And I'm Brian Baskin. We'll be back next week with a new episode. Thanks so much for joining us and be sure to follow us wherever you get your podcasts.