What’s next for beauty M&A? In this special-edition Q&A, Alexandre Terseleer—a partner in the private equity practice at global strategy and management consulting firm, Kearney—unpacks the latest trends shaping the industry. From the impact of megadeals and the rise of fragrance consolidation to the balancing act of scaling derm-backed brands without losing credibility, this discussion dives deep into the key challenges and opportunities. Discover why differentiation is critical for mid-market players, how Gen Z’s spending habits are reshaping valuations, and what it takes to build “must-own” brands in an era of disciplined capital.
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What’s next for beauty M&A? In this special-edition Q&A, Alexandre Terseleer—a partner in the private equity practice at global strategy and management consulting firm, Kearney—unpacks the latest trends shaping the industry. From the impact of megadeals and the rise of fragrance consolidation to the balancing act of scaling derm-backed brands without losing credibility, this discussion dives deep into the key challenges and opportunities. Discover why differentiation is critical for mid-market players, how Gen Z’s spending habits are reshaping valuations, and what it takes to build “must-own” brands in an era of disciplined capital.
Mega-deals as signal, not outliers
Q: 2025 saw headline acquisitions from L’Oréal, Kering Beauté, and e.l.f. How are these megadeals changing the competitive calculus for strategics that haven’t yet moved—and what risks do late movers now face?
Terseleer: The beauty industry has been talking about growing need for consolidation across all pillars of the value chain, from R&D and product development all the way down to distribution and retail, for a couple of years, with investors and brands alike only really starting to move in 2025, now that valuations have come down to more “reasonable” levels. These megadeals will shake the industry as a whole, and trickle down to push smaller players, and later movers to accelerate before the best assets are off the market, for another long industry cycle.
From optional to urgent
Q: To what extent have recent megadeals shifted M&A from a “nice-to-have” growth lever to a defensive necessity for global beauty groups?
Terseleer: The growth of certain categories (skin care during and going out of Covid, now fragrance for the past few years), has also seen a sharp increase in competitive intensity and new entrants. As a result, M&A is now a must to enter in, or double-down on new consumer trends that are here to stay. Megadeals are just a faster way to leverage inorganic growth and accelerate the path forward through acquiring large brands and their vast portfolios in one go.
Fragrance’s consolidation moment
Q: Fragrance has remained comparatively fragmented despite strong growth. What conditions are finally lining up for consolidation—and which parts of the value chain are most likely to roll up first?
Terseleer: Fragrance has been benefiting from deep changes in consumer trends, including frequency of use, appetite for more premium, luxury scents and new habits to “collect” various scents and brands. However, at this stage the offering has become so vast that most consumers start feeling overwhelmed–lending itself well for consolidation at the level of brands (and portfolios thereof). Other parts of the value chain that require scale (including at ingredients and “juice” level), or also some more niche/curated retail concepts will benefit from further scale to serve these new industry dynamics.
As more dermatologist-founded brands seek buyers, how are acquirers balancing the need for scale with the risk of diluting clinical credibility and founder authority? KoolShooters at Pexels
Derm-backed skin care: scale vs. credibility
Q: As more dermatologist-founded brands seek buyers, how are acquirers balancing the need for scale with the risk of diluting clinical credibility and founder authority?
Terseleer: Having a solid operating model and an org structure that balances the vision and influence of the founder with processes and systems in place (especially around product development and R&D, but not exclusively) to ensure efficacy, testing and also the right type of product and consumer marketing, along with the right distribution channels, will ensure for scalable growth without dilution of the brand promise. Easier said than done!
Hair care’s reset after the boom
Q: Hair care valuations have cooled sharply since the post-pandemic peak. Does that create a buying opportunity—or signal a longer-term structural reset in the category?
Terseleer: Core trends around “skinification” of hair, and overall premiumization of the category, coupled with higher consumer education are still around and promising for the development of the hair care market. They have however taken longer to materialize than what many investors believed coming out of Covid, giving the category somewhat of a different investment horizon than before. We remain bullish on hair care overall.
The “tale of two cities” in valuations
Q: We’re seeing a widening gap between premium/luxe assets and mass-market brands. What’s driving this divergence, and is it cyclical or structural?
Terseleer: Consumer education, and the ever-growing options available to consumers across categories, price tiers, but also sizes (e.g., introducing new formats to make a premium product’s sticker price more approachable) and other factors have made the perceived price gap between premium and mass brands more “relative” than before. New generations of consumers, especially Gen Z are also most likely to collect multiple brands and allocate a disproportionate share of their wallet to beauty, especially fragrance. We expect this trend to hold in the near future, as a result making premium brands more attractive than mass brands (higher margins, faster growth), across most categories.
The squeezed middle
Q: For mid-market brands that are neither prestige breakouts nor scaled mass players, what strategic paths are most viable heading into 2026: differentiation, consolidation, or early exit?
Terseleer: Venturing into adjacent categories where the brand positioning, consumer base or general aura might be a more differentiated fit can be a viable path, albeit not always within reach. For those that cannot differentiate, consolidating value chain assets with players that would enable them to reach new levels of economies of scale or other types of differentiators might be the way forward. If neither of those paths work, exit may be very difficult, regardless of the stage.
"New generations of consumers, especially Gen Z, are ... most likely to collect multiple brands and allocate a disproportionate share of their wallet to beauty, especially fragrance," says Terseleer. "We expect this trend to hold in the near future, as a result making premium brands more attractive than mass brands (higher margins, faster growth), across most categories."RDNE Stock project at Pexels
Normalization of valuations
Q: As deal multiples normalize, what metrics matter more now than they did two years ago—and which once-popular KPIs are losing relevance with buyers?
Terseleer: The notion of customer retention, and any kind of cost to acquire customers or their eyeballs are critical – including earned media value. Investors are scrutinizing more brands that claim to have an ‘explosive’ growth; as they know this cycle could end sooner than later. Margins and profitability metrics remain under much scrutiny, including gross margins in an environment where most brands outsource their production to “turn-key” manufacturers, and may lose track of what they are actually paying for.
Selectivity over scale
Q: With capital more disciplined, what qualities will separate “must-own” assets from brands that struggle to attract bids in 2026?
Terseleer: Overall, the ability to command one or two categories, with a clear price-value positioning that talks to a consumer base that is enthusiastic and highly faithful. Translated into business terms: a high NPS and degree of repeat business in categories delivering healthy growth and margins, with the ability to acquire new customers at a lower cost than competition. And in addition to these, with an operating model that allows for growth without risking to ‘break’ or lose key assets / parts of the organization.
What acquirers want next
Q: Looking ahead, how do you expect acquirer priorities to shift—toward profitability, proprietary IP, community strength or something else entirely?
Terseleer: A combination of the above: IP for the competitive moat, community for the ability to scale organically, and with profitability targets clearly much earlier on than they used to be. The days of waiting for years to pass before becoming profitable are over!
