Q2 2024 Beauty Deals: A Major Slowdown for Growth Investments

After a great start to 2024, beauty investment & M&A activity hit a bump in the second quarter. Deal activity dipped 23.5% compared to the same time last year, with the BeautyMatter Deal Index noting just 52 deals. For the first half of the year, deal activity's down 5.6%. The Index also tracked seven more brand shutdowns, making it 14 total shutdowns in the first half of 2024. The largest development during Q2 was a big drop in growth deals (like venture-backed deals and minority investments). The Index recorded just 16 growth deals, the lowest since we began tracking. Over the past 15 quarters, BeautyMatter tracked an average of 44 growth deals per quarter. In 2023, it was about 32 per quarter.

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Why did growth deals decline so much in Q2? Some insiders link it to private equity and venture firms struggling with fundraising over the past 18 months. Essentially, there’s less money available for beauty deals. But Ilya Seglin from Cascadia Capital thinks differently. “I don’t think it's about fewer venture or private equity dollars; there's still plenty of money chasing beauty deals,” Seglin said. “I believe it’s the effect of strategic M&A recalibrating how they approach deals.”

Large strategics are being more selective now. They look for brands with sustainability across all business drivers—a diverse product portfolio, consistent consumer engagement beyond viral moments, and balanced distribution not reliant on one retailer or channel. Investors are assessing if their capital can help execute all these key drivers, but very few brands truly can. So, it’s overall skepticism about sustainability that’s influencing this trend.

Despite fewer growth deals, some categories still attracted plenty of attention in the first half of 2024. Health & wellness (+100%), men’s grooming (+100%, though from a small base), skincare (+71.4%), haircare (+60%), and personal care (+25%) were winners. Skincare made up 21.5% of all deals so far in 2024, with 24 out of 117 tracked by BeautyMatter. Declining categories included funds & platforms (-71.4%), supply side (-43.3%), brand portfolio (-42.9%), retail (-37.5%), fragrance (-25%), and professional (-21.4%). Color cosmetics and technology categories stayed flat compared to last year.

During Q2 2024, skincare and supply side were the busiest categories with each logging 11 deals. Notable skincare deals included Estée Lauder’s full acquisition of Deciem; Grown Alchemist’s purchase by André Hoffmann and Anna Teal; and Beautycounter’s takeover by its founder Gregg Renfrew. Key supply side deals included Circular securing funds to scale a sourcing platform for recycled materials; Three Hill’s investment in Italian amenities company La Bottega; and Berjé acquiring Global Citrus International & Acelim del Peru.

Other significant Q2 transactions were Puig’s IPO; L Catterton buying KIKO Milano & Stripes Beauty; PCA acquiring SpaceNK's wholesale division; and rePurpose Global buying Bluebird Climate.

Additionally, seven more brands failed this quarter, making it a total of 14 for 2024 so far. Among those shutting down were Beauty Bakerie, Care/of, Boscia & Plus.

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Why Did Big Deals Lose Momentum?

Earlier this year, there was buzz about headline-grabbing deals coming to market, especially involving makeup brands like Glossier, Kosas & Rare Beauty being explored for options (alongside skincare brands Byoma & Glow Recipe). Summer Fridays announced a growth investment by TSG Consumer but it didn’t seem like the massive exit many expected.

Why haven't these buzzing deals made announcements yet? According to Seglin: “Strategics and large private equity firms are reassessing acquisitions.” Recently, multiple high-priced multi-million/billion dollar deals didn't meet expectations, causing hesitance across buyers to write large checks & pay high multiples—especially for fast-growing post-COVID color cosmetics brands where sustainability is uncertain.

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What Lies Ahead

Looking forward to beauty deal possibilities in the second half of the year reveals uncertainties tied to factors like consumer sentiment, wage growth, inflation, interest rates & geopolitical issues—all affecting deal-making volatility.

The upcoming U.S presidential election adds another layer of uncertainty likely pushing major potential deals on hold until stability returns post-election cycle—a pattern suggesting Q3 might be slower than usual historically but could eventually lead to an active end-year finish once conditions clear up post-election.