Over the past decade, beauty saw an M&A boom as the sector’s biggest companies like L’Oréal, Unilever, Procter & Gamble and the Estée Lauder Cos. bought smaller, independent brands to build out their portfolios and give them access to Millennial consumers and exposure to the specialty channel. So big was the gold rush among the indie brands that many were sold for upward of $500 million, some for over the $1 billion mark, with astonishing double-digit multiples at play in certain deals.
Increasingly, though, the large players are taking a different approach to M&A. Instead of only making very big bets, they appear to have changed tactics and are also making a number of smaller wagers on what the future looks like through investments in very early stage beauty and tech companies. Some companies are making investments as low as $50,000 in emerging brands and many are capped at around $10 million.
“Instead of buying companies outright, they are electing to invest in them and acquire a minority stake, which gives them a lot of color about the company, its products and its culture. I think of it almost as an engagement period before a marriage,” said Lindsay Carlson, a managing director at investment bank William Blair. “It’s a perfect opportunity to confirm that there’s a longer term, sustainable fit between organizations.”
Among recent deals, L’Oréal’s venture capital fund, Business Opportunities for L’Oréal Development or BOLD, was one of the participants in a $4 million funding round for French metaverse developer Digital Village.
Established in 2018, BOLD has invested in a range of disruptive start-ups including French biotech firm Microphyt, Japanese personalized beauty company Sparty and temporary tattoo-maker Prinker Korea.
Of its investment in the metaverse, Camille Kroely, chief metaverse and Web3 officer at L’Oréal, commented at the time that Digital Village’s solutions “will be powerful enablers for our brands and whose ideals of sustainability, accessibility and interoperability in the metaverse or Web3 are ones we share.”
Part of the reason for the evolution in strategics’ investment plans is seeing how much private equity and venture capital has made so getting in early gives them a larger share of the profits, banking sources told WWD.
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