In the first half of 2025, beauty M&A surged back to life with a flurry of headline-grabbing deals. But as investors remain selective and cautious, it’s worth asking: can the momentum last?
Major transactions included Elf Beauty’s $1 billion acquisition of Hailey Bieber’s Rhode, as well as L’Oréal’s investments in a majority stake in Medik8 and minority stakes in Jacquemus Beauty and Amouage, the Omani fine fragrance house. Church Dwight acquired buzzy hand sanitiser brand Touchland, while ayurvedic brand Indē Wild secured $5 million in funding led by Unilever Ventures. Unilever also snapped up Wild and Dr Squatch. Meanwhile, General Atlantic acquired fragrance brand Kayali. Viral lip stain brand Wonderskin and Sacheu’s parent company Gloss Ventures, raised $50 million and $15 million, respectively, from Insight Partners and Peterson Partners.
Why were these brands the top picks in an otherwise cautious market? Lilac Watt, investor at early-stage VC firm Venrex, says they demonstrated strong fundamentals, including high retention, brand defensibility and cultural relevance — qualities that made them stand out after a relatively quiet 2023 and 2024.
Among the most talked-about deals is Rhode’s acquisition by Elf Beauty, especially given the mixed track record of celebrity beauty brands. “Investors are constantly evaluating the staying power of emerging celebrity brands, and Rhode is a case study in building both product credibility and lifestyle relevance — alongside celebrity power. The team not only delivered on product, but on emotional connection, fostering an ecosystem resonating beyond beauty,” says Sonya Brown, general partner at Norwest, a global venture and growth equity firm.
Watt agrees: “At $200 million in revenue and strong EBITDA margins, the brand’s minimalist, skincare-first approach resonates with the Gen Z customer. It stands out for its authentic founder narrative and community engagement, making it both profitable and culturally relevant.”
Caroline Weintraub, investor at True Beauty Ventures, highlights the Touchland deal as a standout for H1. “Touchland sustained momentum by elevating the category through innovation in scent, design and consumer engagement. From an investment standpoint, the brand showed strong repeat purchase behaviour, clear white-space ownership and brand affinity typically reserved for prestige fragrance or skincare,” she says. It’s a rare example of scalable brand equity in a niche segment.
Most notably, strategic investors are back and shopping. “Strategics are willing to pay up for brands that have a strong and enduring resonance with customers and robust growth potential,” says Marissa Lepor, partner and head of beauty at investment bank The Sage Group. “These brands demonstrated excellence in core strategy and distribution, along with a clear path to continued sales and profitability.” This is what gave acquirers confidence in deals like Rhode, Medik8, Kayali and Touchland, she says, “they’ll be addictive to their respective portfolio for years to come”.
As for the rest of 2025, experts forecast increased activity in both strategic and growth-stage deal-making. Investors and analysts are zeroing in on performance-first brands with long-term potential.
Fading appeal
Despite H1’s roster of deals, not all categories or strategies will continue to attract the same level of capital.
Watt notes that clean beauty is losing steam. “Consumers are now more ingredient-literate and demand efficacy over marketing buzzwords. ‘Clean’ is a label that’s become overused and under-defined,” she says. For clean brands to stand out today, they must focus on clinically backed ingredients, dermatological testing to prove claims, traceable sourcing and functional differentiation, like solutions for barrier repair or hormonal skin.
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Celebrity-first brands, while not entirely off the table — take Rhode, for example — are approached cautiously. “Unless the product-market fit is strong and the brand authentic, investors remain wary,” Watt says. Analysts say they’ll be watching Rhode’s performance in the market closely moving forward, especially considering cautionary tales like Kim Kardashian’s Skkn by Kim, which was acquired by beauty conglomerate Coty in 2022 and divested in 2025. Such ill-fated investments highlight the risk of relying on celebrity-backed brands. Sustaining long-term sales performance while maintaining cult appeal in line with shifting consumer tastes, remains table stakes from an investment standpoint.
Colour cosmetics, too, are facing headwinds. “Makeup is crowded. Many strategic portfolios are bloated in the category, which will leave some incredible brands without a natural buyer,” says Brown. Analysts note that consumer brand loyalty in makeup is lower than any other category. Recent earnings reports from Coty, Estée Lauder, Puig and Elf Beauty have shown sluggish makeup sales due to fierce competition from dupes and shifting preferences towards skincare-led cosmetics. As a result, TD Cowen’s managing director Oliver Chen says investors will be watching the category for brands that clear the higher hurdle, rather than rushing in to invest.
However, Brown remains optimistic and intrigued to see whether new buyers will emerge to take up hopefuls, meaning makeup brands like Rare Beauty, Glossier and Makeup by Mario, who have been searching for homes, may still have a chance.
The era of “growth at all costs” is over, says Coye Nokes, partner at OC&C Strategy Consultants. Rapid growth is no longer enough; Chen calls the strategy “a leaky bucket for brands”. “Brands have been heavily spending on performance marketing to acquire customers at any cost, but it’s very unhealthy [for the bottom line], because the customer comes, buys, but doesn’t return,” Chen says. “Brands were paying so much for customers to transact. So they’re spending, they’re seeing revenue, but it’s at a loss and it’s not profitable.”
Now, investors are cautious and want durable, repeatable growth. “Medik8 and Amouage are prime examples,” Nokes notes. “Part of their attraction was that they had clearly developed a DNA, which could be replicated across markets: differentiated product, strong consumer appeal, proof of range and geography expansion.” Investors now are looking for profitability, operational discipline and retention, adds Watt, while thanks to macroeconomic pressures like tariffs, local supply chains, less money tied up in daily operations and inflation resilience are increasingly attractive.
How to build a brand with an exit path
In the shadow of product dupes, investors and buyers want to see defensibility. What makes you hard to copy, experts say? “Founders will need to emphasise intellectual property and proprietary formulations, clinically backed claims, ingredients sourcing advantages, and retail sell-through data, not just where you’re placed within the retail cohort,” says Watt. “Investors want to see not just why you’re winning today, but why you can keep winning against the waves of lookalike brands”.
As for the categories that are likely to sprint across the deal line in 2025 and into 2026, dermatological skincare (skincare products that are developed, tested or recommended by dermatologists) is a clear front runner. “The sector remains in high demand due to its results-driven appeal,” says JP Morgan’s Celine Pannuti, head of European staples and beverages research, who also covers beauty. Nokes agrees. “Premium, dermatologist-led brands are driving market growth,” he says, citing L’Oréal’s Medik8 investment and potential future movement around Skin + Me, a bespoke treatment skincare brand.
Higher performance expectations (dermacosmetics) aren’t exclusive to skincare, experts say. “There’s increased activity in haircare and bodycare as ‘skinification’ trends take hold,” says Brown, noting brands like Divi and Maëlys. Therefore, as efficacy and results-driven brands in these sectors become increasingly attractive, Brown’s Norwest firm is also paying attention to the brands making noise in professional channels (such as skincare clinics and hair salons) as they act as co-signers for companies that are moving the needle. Other growing sectors include biotech beauty, as well as problem-solving players addressing climate concerns, menopause and hormonal skin.
Weintraub, Chen and Pannuti say fragrance still holds promise, especially where consumer demand and personalisation are growing, thanks to hype from young customers and strong retention. When you find a scent you like, you keep buying it. There is also more innovation at play for perfume, adds Chen, highlighting niche and functional fragrances as a nascent investment opportunity.
By brand, Watt predicts that Dieux, Typology and Nécessaire could be next in line for a buyer. “They are all brands with tight formulations, strong direct-to-consumer [DTC] performance and thoughtful expansion strategies,” she says. In terms of potential movement in the M&A market, Watts has her eyes on Gisou and Merit as their cult statuses continue to climb through the beauty brand rankings. “From a startup perspective, I always have my eye on brands with strong innovative visions such as Freaks of Nature, Conserving Beauty and Raaie,” Watts explains.
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The future of beauty deal-making
Expect a robust mix of deal types in the months ahead. “We’ll see minority and majority-stake deals, along with full acquisitions,” says Michele Miyakawa, co-founder and managing director at investment banking firm Moelis Company. Investors are sitting on stronger balance sheets, while private equity firms hold dry powder, fuelling activity. But, Nokes warns, acquisitions will be more challenging to secure as interest rates remain high, raising the cost of capital.
Investors making minority stakes in brands are expected to rise, especially among profitable, founder-led brands looking to scale without giving up control. “Founder-led brands remain compelling because they often have authentic narratives and strong communities, agility in decision-making and a clear brand voice that’s difficult to replicate in-house,” says Watt. Elsewhere, investors say bolt-on acquisitions (where larger players snap up smaller, innovation-driven companies) will also remain attractive to corporates pursuing innovation through tech or IP. One example: Estée Lauder Companies’s (ELC) minority investment in Exuud in January, a fragrance-tech company using biodegradable polymers in place of aerosols or heat. “These deals are lower risk, faster to integrate and offer instant access to niche audiences or innovation,” says Watt.
Recapitalisations are on the rise, she continues, as venture capitalists look to exit ageing portfolios, taking Unilever’s acquisition of Dr Squatch from growth equity firm Summit Partners as the most recent example. According to management consultancy Kearney, this presents a unique opportunity for investors to snap up assets at favourable evaluations.
Looking ahead, Weintraub says brands that combine efficacy with cultural and emotional resonance are poised to lead the next wave of investment, and according to Lepor, investors at all stages will yield a variety of transactions as a result. In today’s climate, however, stability, profit and execution will stand out as analysts expect the market to remain unpredictable for now. “Investors want disciplined growth and a sharp point of view,” concludes Brown.
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