YEAR END BEAUTY DEALS: INVESTMENT + M&A REPORT EDITED PREVIEW INTELLIGENCE BY: IN COLLABORATION WITH: This report was created in partnership with Synchronicity Ventures. The shifts and findings related to the beauty and wellness land- scape identified in this report are the result of category analysis and the tracking of investment activity, including thousands of ar- ticles and research conducted by the BeautyMatter editorial team as well as intelligence provided by the BeautyMatter advisory arm. Beauty Deals: M&A Transactions - Year End BeautyMatter is a research-based content plat- Synchronicity Ventures, founded by Jorge form and advisory practice founded by Kelly Cosano-Martinez, is an early-stage incu- Kovack. No one has their finger on the pulse bator helping launch, build, and scale the of the beauty and wellness space quite like next generation of great consumer brands. we do. We’ve built a comprehensive frame- It focuses on pre-seed and seed stage, pur- work to capture data, conduct research, and pose-driven brands tapping today’s changing connect the dots. Our future-focused in- consumer values and behaviors to lead new dustry insights and actionable solutions en- solutions that improve people’s life and well- able bold decision-making and business im- being. Synchronicity Ventures incubates brands pact. We help leaders stay connected and in three key verticals: Beauty & Wellness, informed in a constantly changing world. Food & Beverage, and Consumer Technology. Beauty Deals: M&A Transactions - Year End FULL REPORT Contents INTRODUCTION 05 - 18 DEAL FLOW 19 - 22 INSIGHTS 23 - 32 INVESTORS 33 - 34 BRAND PORTFOLIO 35 - 49 COLOR COSMETICS 50 - 76 FRAGRANCE 77 - 85 FUNDS + PLATFORMS 86 - 100 HAIRCARE 101 - 122 HEALTH + WELLNESS 123 - 165 MEDIA 166 - 169 MEN’S + GROOMING 170 - 176 PERSONAL CARE 177 - 213 PROFESSIONAL 214 - 227 RETAIL 228 - 276 SKINCARE 277 - 310 SUPPLY SIDE 311 - 383 TECHNOLOGY 384 - 406 SYNOPSIS BY QUARTER 407 - 437 INTRODUCTION Year in Review As the dust begins to settle and we look to the vaccine to provide a way out of this cri- sis, there is still a long road ahead. The pan- demic delivered a core shaking blow to the world as we knew it—collectively we will emerge transformed. Whether this transfor- mation is a positive or negative will be largely defined by circumstance and perspective but make no mistake—our post-pandemic world will be vastly different. In a June McKinsey & Co. study, research found that 75% of con- sumers tried a new shopping behavior since COVID-19 started, with 73% of those who tried a different shopping method or brand intending to continue. For the past several years, the global beau- ty market has seen annual growth of around 5.5%, while the prestige segments’ rate of expansion has been higher at around 6% to 7%. Many industry watchers predict declines in the 20% range at least for 2020, although this varies by category, channel, and market. INTRODUCTION Just the Numbers: Year in Review First Half 2020 Sales According to L’Oréal Es- Skincare vs Makeup: Although online beauty sales have surged timates: amid the pandemic, this activity has not • L’Oréal saw skincare sales up 1.1%, while been enough to offset the decline in in-store • Global beauty sales 2019 +5.5% vs 2018. makeup declined 28% in the first half of purchasing while stores were closed, which, • Global beauty sales first half 2020 -13% 2020. pre-COVID, accounted for up to 85 percent to -14%. • Estée Lauder saw sales of skincare up 3%, of sales, McKinsey estimates. They predict • Global prestige beauty sales 2019 +10% while makeup fell 61% in the most recent total e-commerce sales will rise to 19% of vs 2018. quarter. total beauty sales in 2021, an increase of 36% • Global prestige beauty sales first half CAGR from 2019. The ascendance of Amazon 2020 -23%. While the beauty sector is proving to be re- during this period is a testament to this shift silient, recovery is contingent not only on and cannot be overlooked. The e-commerce NPD US Prestige Category Sales Q3 Dollar the continuing impact of the pandemic, but behemoth is reportedly on track to capture Sales and Growth, July-September 2020 vs also on whether purchasing power will hold $10 billion, or over 10%, of US beauty sales in 2019 up over the next year. Prediction on the time 2020 (up from $4 billion and under 5 percent frame for a rebound seems to be, at least to in 2018). some extent, tied to the online penetration Makeup -31% and maturation of channels in the market. While brick-and-mortar retail was hard hit, physical stores will remain important to the Skincare -11% Global Beauty Market Rebound According to beauty sector; but how consumers shop, McKinsey & Co.: where they choose to shop, and what they Fragrance +1% buy may be very different. Success will be • China: Rebounded in August 2020 with found in meeting consumers where they are Hair +11% continued dynamic growth 8% to 10% in this new normal. Larissa Jensen, beauty in- compounded annual growth rate (CAGR) dustry advisor at the NPD Group, believes, expected in 2021. “While online sales have been strong, brick- Nail +13% • United States: Forecast to rebound next; and-mortar remains a key factor in the indus- expected to return to growth by mid- try’s recovery.” Body +17% 2021, with continuing growth of 3% to 4% CAGR through 2022. Home Scents +21% • Western Europe and Japan: Expected to face longer recovery, not reaching 2019 sales levels until late 2021 or 2022. The Global Beauty Industry Has Been Consistently Resilient . GLOBAL BEAUTY INDUSTRY RETAIL SALES, $ BILLION +5.0% +3.2% +4.1% +4.6% 500 477 455 51 Fragrances 436 49 418 47 400 45 72 383 43 70 367 42 67 349 40 63 332 38 319 58 309 37 54 297 35 51 140 281 33 33 49 132 267 32 46 123 30 44 117 28 42 43 111 40 102 106 97 37 38 92 88 81 84 72 77 68 236 198 205 211 218 227 154 159 165 174 182 190 141 148 134 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Note: Figures may not sum to listed totals because of rounding SOURCE: EUROMONITOR 1Includes bath, haircare, men’s shaving, oral care, shower, and adults’ sun care products; deodorants; and depilatories Year-Over-Year Change in US Q3 Sales by Category SOURCE: NPD GROUP The New Consumer E-Commerce Penetration by Category in the US SOURCE: EARNEST RESEARCH INTRODUCTION Looking Back at Our 2019 Predictions A lot can happen in 12 months. Heading next beauty leaders driving the continuation Clean Color: The overarching color cosmet- into 2020, M&A activity in the beauty sector of smaller capital raises. The decade also be- ics category continues to struggle, and con- had been on fire for several years, and while gan with a new environment—magical uni- sequently transaction activity will continue to there was constant chatter of a beauty bub- corn thinking was replaced with investors be slow with the exception being the clean ble, 2019 proved to be another strong year. looking for profitability and practicality rath- color segment. Formulation technology has Everything seemed to get bigger—the invest- er than the high-flying bets on disruptors fo- evolved, allowing clean color brands to com- ments, the deals, and without question, the cusing on growth before profitability. “Where pete on long-lasting wear, performance, and exits. As of 21 November, beauty deal activity we are in M&A today, there’s a cautionary tale payoff. Clean color brands are going to be a for 2019 had already outpaced 2018 by 19%, between the past and present,” said Andrew hot commodity in 2020, breaking out of their according to investment bank Capstone Shore, Managing Director at Moelis. When niche status. Headwaters. Strategic buyers, venture capi- the makeup category was strong, purchase tal firms, and private equity companies had prices for brands went way up, Shore noted. The Activity: While the general color catego- all been active, with many newcomers enter- “You found that every year, lower-quality as- ry continues to struggle, as predicted a bright ing into the space. Beauty unicorns emerged, sets were sold at higher prices, and now stra- spot could be found in the category with sus- there were a number of billion-dollar deals, tegics are being more selective.” tainably minded brands with clean formula- some brands were trading for more than tions. eight times revenue or 10 to 15 times earn- But no one could have predicted the turmoil ings, and bets were made on the next crop of COVID-19 would unleash, creating a glob- The Deals: indies with smaller capital raises in the $5–$10 al crisis sparing few industries. While this million range. year will be one of the worst, with the big- • Ilia Beauty raised a Series B from gest sales declines in history, the beauty in- Sandbridge Capital to fuel growth. The consensus was the market would contin- dustry has shown resilience with decreas- ue to be healthy, with many investment bank- es far less dramatic than that of many other • Kjaer Weis received funding from ers reporting robust pipelines of beauty deals sectors. Even with all the uncertainty and dis- Waldencast, a dynamic new fund focus- for 2020. Others didn’t expect 2020 to be as ruption of 2020, our 2019 predictions for the ing on early-stage beauty and wellness robust as 2019 because the pool of mature year held true. Below were the predictions in brands.