Beauty and wellness M&A transaction activity for 2021 year-to-date has risen 56% year-over-year to 75 deals, according to a new report from Capstone Partners. This rise outpaces the wider consumer industry.
The pace of deals in 2021 does however pale in comparison to the 87 deals seen in 2019.
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The gains in activity in 2021 were attributed to strategic buyers' healthy cash flows and a desire to expand product portfolios. In addition, per Capstone, "private equity has capitalized on vast reserves of dry powder and cheap access to debt capital."
“Skin care remains the most sought-after category in beauty, largely due to its high price points and margins, its lack of fashion risk, and customer loyalty to brands,” said Capstone’s head of consumer investment banking, Ken Wasik.
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Deals by category are as follows, year-to-date, 2020/2021:
- Skin care: 23/33
- Makeup, fragrance, nail, lip care: 4/17
- Hair care: 6/10
- Contract manufacturers: 9/6
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Private strategics represented the top buyer sector (46.7%)., while public companies slightly increased their share of activity to 21.3%.
Per Capstone, "Private equity firms have largely acted through add-on deals to enhance sector portfolios."
Capstone concluded, "Emerging, independent, and often digitally-native brands have garnered healthy buyer interest through YTD as strategics look to expand product offerings to cater to millennials and Generation Z, while private equity bolsters sector portfolios through add-on acquisitions."