Beauty And Personal Care M&A Forecast For 2024: Kearney Report

Global management consultancy Kearney has released a new study highlighting how changes in marketing, consumer preferences and digital shifts have created a new M&A landscape for the beauty and personal care industry—a historically attractive target for mergers and acquisitions over the past several decades.

“After many years of being an attractive target for mergers and acquisitions, the beauty and personal care space is facing major changes in M&A deal sizes, particularly in the mid-range sector,” said Pauline Mexmain, a senior manager in Kearney’s consumer practice. “The lower multiples offer unique opportunities for both financial and strategic acquirers who are considering investing, while putting pressure on VC and PE-backed companies.”

The new report, Beauty and Personal Care: Resetting the Stage for M&A, was developed from industry data, analysis and close observations as well as a survey of senior industry executives who focus on M&As around the globe and senior investment professionals responsible for setting and executing M&A strategies.

Transaction Volume Expected To Rise

The study found that 89% of responding industry leaders believe that business planning and consolidation M&A volume will increase over the next two years, driven by the limited growth of the existing brand portfolio and accelerated by the expectation that Gen Z, which drives 30% of the beauty industry’s growth, does not always favor legacy brands.

However, Kearney’s analysis reveals that the industry’s M&A track record is far from positive, with many deals delivering limited value for shareholders. The sector is also facing fundamental changes, and M&As are an important instrument and catalyst enabling brands and investors to adapt and strengthen their portfolios. Combined with high interest rates and volatile corporate valuations, this has created an environment in which a clear M&A strategy is paramount.

Blurring of Beauty & Wellness

In the analysis, Kearney offers insight into what product areas will be of interest—with skin care and face care in the spotlight. In addition, the growing interest in beauty tech and appliances will also factor into M&A activity.

“Based on an in-depth survey of 150 industry executives on the acquisition side, conglomerates, strategics and financial players such as PE funds globally, we expect that over the next couple of years, face and skin care will dominate deals, closely followed by body care, then beauty tech and appliances. This last category results from the blurring of lines between wellness and beauty. These three categories out of the nine we analyzed, are likely to attract most investment and continue dominating deals,” said Mexmain. “Along with that, we also see a rise in the fragrance category.  Indeed, skin care and fragrance are particularly resilient right now. Looking more retrospectively, we’ve seen a steady decline in deals around makeup, where the category represented 53% of deals in 2018 and is only expected to take up 30% of the total deal pie in 2023.”     

Window of Opportunity 

“Given financial market headwinds, the year ahead will undoubtedly present a window of opportunity for experienced acquirers,” said Gavin Meschnig, Kearney partner and expert in the beauty and personal care space. “In the current environment, decisions about portfolios will separate the winners from the losers. Leading beauty and personal care players will move decisively to adapt their portfolios in an agile way.”

The study clusters business planning and consolidation transactions into three categories: acquisitions that enhance the portfolio, those that integrate the value chain, and those that access new capabilities. It then assesses and quantifies these areas of the beauty and personal Care M&A market including: increasing deal volumes with lower transaction values; dominant position of small transactions in the M&A market; corporate venture capital transactions and deal rationale by year from 2018 to present; beauty and personal care M&A deal rationale; M&A deal rationale breakdowns by year from 2018 to present;  M&A outlook (executive sentiment) over the next two years; degree of successful integration of acquired companies; and more.

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