Getting Investors Primed and Ready for Beauty Sector M&A

Past cycles have proven the beauty sector is resilient to downturns, but how will beauty M&A make out in the coming year? Fromm Beauty’s Marty Okner and DC Advisory’s Luc-Henry Rousselle join the podcast to discuss the most promising beauty subsectors, the challenges and opportunities in celebrity beauty brands, and what they expect for beauty dealmaking in 2026.

Read a transcript of the podcast below.

Middle Market Growth: Welcome to Middle Market Growth Conversations, a podcast for dealmakers discussing the trends shaping the middle market. I’m your host, Carolyn Vallejo, and this is a production of the Association for Corporate Growth. Today we’re talking all about beauty industry M&A with Marty Okner, CEO of Fromm Beauty, and Luc-Henry Rouselle, managing director of DC Advisory. They’re here to discuss trends like the meteoric rise of celebrity beauty brands and their outlook for the industry in 2026. Marty and Luc-Henry, welcome to the podcast.

Marty Okner: Thanks so much for having us.

Luc-Henry Rousselle: Thank you.

MMG: Now to start our conversation, we always like to spend a little bit of time to get to know you each a little better. So, Marty, how about you kick us off by telling us a bit about yourself and your work at Fromm Beauty.

MO: Yeah, sure. So, I’ve been in the beauty industry for about 20 years, consumer goods for almost 30 years. Kind of scary to say that out loud. Basically, Fromm is a 100-, almost 120-year-old company and two years ago after three generations of family ownership, they decided to sell almost 100% of the company. And I got to co-invest alongside Firelight Capital Partners, which is a mid-market private equity firm here in New York who acquired the company. And I became CEO post-closing. And right now, we’re on year two of our journey to grow from, and really, you know, glad to say that we’ve been achieving a lot of success with our brand, the Hair Edit, which has emerged as our flagship brand. We’ve expanded distribution in that brand into Target. We’ll be launching at Kroger year-end, and we’ve got some really exciting works in the innovation pipeline for that brand as well.

MMG: Excellent. And Luc-Henry, can you tell us about yourself and your role at DC Advisory?

LHR: I’m Luc-Henry Rouselle, I’m managing director at DC Advisory. I’m in charge of the beauty, health, and wellness industry. It’s an industry I’ve been covering for, you know, close to 15 years. My first transactions were advising Estee Lauder on their acquisition of Smashbox, Coty on their acquisition of OPI, and had, you know, a few years of covering the industry at Lehman Brothers and at Moelis. During my career, I had the opportunity to also go on the corporate side and worked, you know, close to five years at the Estee Lauder companies, where I was a part of the corp dev team during an acquisition spree. And I also had a finance and strategy role at Mac Cosmetics and returned to investment banking after that. But now it’s been, you know, two and a half years at DC Advisory.

MMG: Excellent. We like to ask our guests at the top of every episode what their first ever job was and whether there was a lesson that they learned that they still carry with them today. So, Luc-Henry, let’s stick with you. What was your first job?

LHR: My first job was as an investment banker at Lehman Brothers. I think, you know, I went through the bankruptcy back in the day in New York as a, you know, relatively junior banker. And, you know, I think what I took away from that is there’s only so much that that’s under your control, but you really need to be persistent and keep going, no matter what. And things work themselves out. And I really enjoyed my experience actually at Lehman Brothers overall and that’s where I got my passion for investment banking. So, despite that challenge, you felt you could overcome almost anything, once you’ve gone through that.

MMG: Perseverance is definitely a great lesson to learn.

LHR: Perseverance is a big one.

MMG: Marty, same question for you. What was your first job?

MO: Yeah, so my first job out of college, I started with Philip Morris Kraft back when they were merged, and I basically sold merchandising programs to independent convenience stores throughout midtown Manhattan. And what I learned from that, that’s kind of a quote from my one of my early mentors who was my manager at the time—he said all the action happens at retail. And, you know, I think even in today’s omnichannel environment, that really still holds true. Most of the retail metrics that we look at, whether it’s in the dotcom environment or store level, you really analyze the business in very similar ways in terms of both the cost to acquire, retain, and calculate the lifetime value of a customer. Also calculating return on what it is that you might be selling, or you might be looking to initiate in terms of project work. And I think those basic tenets carried me through very early in my career and I still fall back on them today. And to this day, one of the first places that I go whenever I look at our brand is right to our retailers—Ulta, Target, Kroger. So that’s where I stand and I look at what’s happening and I look at who’s shopping the shelf, and I go back to the numbers, see what I can see in the numbers based on what I’ve observed in store and that sheds a whole new light on the business, sometimes from when you step outside being in the office and just talking with your team.

MMG: Getting on the ground. That’s definitely really valuable. And we’re going to talk about some of those trends that are happening in the beauty space, so let’s get down to it. I can’t believe I’m saying this, but we are already nearing the end of 2025, so everybody is looking ahead to 2026. What are both of you expecting for beauty M&A in the year ahead? Are there any particular trends you’re watching here? Luc-Henry, will you start us off with this one?

LHR: Sure. Look, I think for beauty M&A, we’re seeing a steady recovery and activity after a couple years that were relatively slow compared to the boom years of 2021, 2022. I think with that, we’re seeing strategics leaning in and a number of transactions that have been completed, which gives investors a lot of confidence that at the end of the rainbow there are still strategics that need to transact. We’ve seen now monster transactions like the one that Kimberly-Clark just announced with the acquisition of Kenvue, like L’Oreal’s acquisition of the beauty business of Kering, as well as others being active like Elf and Unilever. So that’s, that I think are good green shoots. I think there’s some other tailwinds where there’s an important backlog of high-quality private equity-owned portfolio companies that should come to market that have been long held and are waiting for that window to exit. And we’re also seeing that strategics have announced for many of them a review of their portfolios, so we think corporate carve-outs and divestitures are going to be an important theme of the next couple years. So, all of that I think will make for a good recovery in the next couple years.

MMG: Excellent. And Marty, what about you? What are you seeing for the year ahead?

MO: Yeah, I would agree from the operator’s perspective, we’re starting to see some green shoots as well. We’re starting to see the consumer remain resilient, despite seeing some softness in store traffic overall. I think they’re definitely being more choiceful about what they’re spending, but I do think that that tailwind will continue to grow and increase in speed as we get into 2026. So, I’m overall very optimistic about the health of the businesses out there, and I think obviously healthy businesses make for a very healthy M&A environment. And I also probably see  in the future some easement of interest rates as well. And I think that that also will help in terms of getting deals done and financed at more favorable rates.

MMG: I know dealmakers are absolutely welcoming these interest rate cuts right now. Now, in 2025, as we’ve seen of course the economy has given a lot of mixed signals. Consumer sentiment does seem to be trending downward. There are recession fears that have been reignited as we approach the end of the year and into the new year. And I will say that the full results of our outlook survey won’t be live for another few weeks, but sort of as a sneak preview, what I can say is that when asked about which industries are expected to see decreased M&A activity, retail was their top answer. So, what I’m hearing from you both is there actually is a lot of optimism, but if there is an economic downturn or further economic downturn, how will that impact the beauty market? What do you expect if we do see a recession or a significant downturn next year? Marty, let’s start with you on this one.

MO: Sure. You know, I think we’re seeing the consumer staying resilient. I do see a bit of blurring between mass and prestige, which I think that’s just been a long-term macro trend that we’ve really seen in beauty for the past 15 years. And I think part of that was driven by D2C kind of democratizing price points. And I think what that’s done is that’s given consumers more options to stay engaged with the category based on where they’re shopping and possibly trade up or trade down according to how they’re feeling and what their pocketbook would allow in that specific time. So, I do think that we’re seeing a good amount of resilience among the consumer where they might just be buying different things at different price points. I think that’s going to continue to be the dynamic even in an economic downturn. I think Leonard Lauder’s lipstick theory is still very much alive and well, it’s just materializing in different ways and that’s driven by the fact that the consumer just fundamentally has more options in beauty to transact with. And, you know, that may not necessarily materialize in your traditional department store purchase or online purchase, but they might be shopping masstige at Target. And that’s an area where we’ve seen some really big players emerge in a very short amount of time. So, I think the consumer’s going to stay resilient regardless. They just may be buying different things according to what they feel they can afford.

MMG: You know, just for our listeners there, you mentioned the lipstick theory, which I love, and just to clarify, the lipstick theory does say that even in an economic downturn there are these affordable kind of luxury items like lipstick, and those sales tend to increase during a downturn because consumers want these little indulgences, these small luxuries in their life. So that makes a lot of sense. Luc-Henry, do you have anything to add here?

LHR: I think that historically, the beauty industry has been very resilient in a crisis and even in a recession has had limited downward trends. But most importantly, even if there is a recession, the industry has rebounded pretty fast from that. I think, look, we’re pretty optimistic about next year. We don’t necessarily see a recession happening, but even if it did, there’s one corner of the consumer world that that’s shown and proven time and time again that it’s resilient. It is beauty and personal care. This is a product that people use in their everyday life for, you know, there’s a lot of problem solution products there, or just regular use products in the category. It’s your shampoo, your conditioner that you’re going to keep using every day, and it is a small luxury for the most part and an affordable one that the consumer has historically, you know, it’s not the first place they’re going to cut when things get tough.

MMG: Absolutely. Well, considering the optimism that you both hold for beauty industry M&A next year, tell me a little bit about the types of deals that you are expecting to see. Luc-Henry, I know you mentioned that strategics are leaning in here in this space. Do you expect strategics to continue to drive M&A activity? Are we going to see more add-ons or carve-outs?

LHR: Certainly strategics have been the most active, especially in volumes when you look at deal size. But private equity is also leaning into the opportunity of getting in the category at a point where there’s maybe less competition for transactions. So, we’ve seen some really interesting private equity transactions happen from, you know, Bansk acquiring BYOMA from Yellow Wood, to TSG investing in PHLUR, so I think PE is being opportunistic. I think we will see both strategic and PE deals going forward. I think that, from a category standpoint, there are areas of strengths and strong interest. There’s sort of bright areas where professional skincare, science-backed skincare is something that investors are very focused on. Those are products that have strong clinical claims, sometimes sold through the professional channel, meaning derms and medical aesthetics, as well as in Europe through European pharmacies. That’s a segment that that’s been of strong interest as well. And then the other sector that’s been booming is premium and luxury fragrances where the category has been growing very fast and continues to be the fastest category overall into 2025. And so there just new consumer behaviors and appeal for the category have really driven it to new heights or for example, consumers are “wardrobing” when maybe past generations were more loyal to one fragrance. New generation tends to have multiple fragrances for multiple occasions, and that’s creating a lot of opportunity for fragrance brands. Now what’s interesting is that we’re also seeing a lot of opportunity in mass fragrances where there’s been exciting growth, so I’ll be interested to see if there’s more transactions in in that area.

MMG: Marty, what about you? What are you seeing in terms of the types of deals and deal structures we expect to see next year, as well as any specific niches or industry sub-sectors you expect to perform particularly well?

MO: Yeah, so I think Luc-Henry really hit the nail on the head with fragrance. There was an article recently where somebody argued for the fact that this is maybe a cyclical trend and I just firmly disagree. I think it’s actually going to be much more of a secular trend that’s going to go well into the future. Because if you look at the younger generation, especially, you know, I’ve got two teenagers, I’ve got a 17-year-old and a 14-year-old, a girl and a boy, and both of them have multiple fragrances. And when you look at the Gen Z, Gen Alpha consumer engagement with the category, it’s all over in terms of prestige, all the way to mid-tier, to artisanal, to mass. And also, dare I say, dupes or fragrances that might be inspired by some of the luxury fragrances, there’s often some experimentation into that realm as well among the consumer. And some of those companies have scaled to be quite large. So, I do think that fragrance is something that’s going to materialize in many different ways. I think it’s going to touch a lot of different categories, and I believe the sensorial experience behind a product, whether it’s a hair product or potentially a skin cream or potentially a body care product, I think fragrance is going to become even that much more important as part of the overall experience. So, I think that’s one area that is going to be really hot. I think the other thing too is the multi-category brands, I think there’s long been a time where brands sort of stayed in their lane, and I feel like brands that have a really strong equity in one area, I think it can translate into a multi-category story, whether that’s a skincare brand leveraging and leaning in on the “skinification” of hair trend and re-inspiring a lot of those core ingredients that may be efficacious on the scalp and innovating in a different category within beauty. And I think you’re going to see more of that. To Luc-Henry’s point, efficacy is something that’s going to really be key among consumers because there’s a lot of products out there that were very image-derived, and I think the consumer’s going to want it all. They’re going to want the beautiful lifestyle imagery. They’re also going to want beauty that really resonates with them and kind of takes them to an aspirational place, whether that’s prestige or mass. And I think they’re also going to demand that same type of efficacy across the products that they choose, as well. So, it’s going to really pose a lot of interesting challenges for formulators to do that and still be able to differentiate. But beauty’s just such an incredibly creative industry. I just think there’s great minds out there and I think a lot of great things are yet to come.

MMG: So, we’ve talked about science-backed skincare, luxury fragrances, hair care, and there are a lot of niches and pockets in this industry that have a lot of exciting developments and consumer shopping trends. But I want to talk for a minute about who is spending money on these different products. In recent years, have you both seen demographic changes in who is buying these types of products, who’s spending money on these products? Marty, let’s start with you.

MO: I think it’s really becoming a cross demographic spend in a much more meaningful way. So yeah, I think typically the legacy research would show us that the consumer enters the category some point in their teen years, and then they kind of exit the category in their fifties. Now you’ve got a much broader range of engagement in the category in terms of age. Baby boomers represent a significant amount of the spend in the category, and you can get a whole laundry list of research points that Circana did on this in terms of showing Gen X’s engagement in the category. And Larissa Jensen did a brilliant presentation at a WWD CEO summit 18 months ago, really diving into this trend of Gen X being hyper engaged. And then at the other end of the spectrum, you see people as young as nine or 10 years old really engaging into the category as pre-teens. And I think the industry is responding now to really educate and talk to these younger consumers about, hey, these are the products that are right for you. These are the products you really shouldn’t use, like a 9-year-old should not put retinol on their face. So, you know, that’s where there was a whole controversy around certain younger consumers going in and buying brands that were not age appropriate. And I think the industry’s done a nice job to respond and educate and these younger consumers are just absolutely so engaged and so well researched into the category too. It’s not even like the brands are putting things out there and kind of capitalizing on that new trend of younger consumers adopting into the category. The younger consumers are actually doing the research and selecting the brands that they feel might be right for their skin or hair. I think you’re just seeing more cross-generational engagement. The other dynamic too that’s really interesting out there is as you look at like older millennials and Gen X’s who have kids who might be Alpha and Zs, the Gen Z and Gen Alpha children are really inspiring the products that we use. And I’ve learned more about product in terms of both fragrance as well as skincare products from my kids over the past year, and I’ve been working in the category for a long time. So, they’ll find these brands and they’ll show them to me and I find it very fascinating.

MMG: That’s such an interesting point. Are they finding these brands on platforms like TikTok, dare I say? How does social media play into this?

MO: So, TikTok’s a big one. The other source of referral, I would say it’s TikTok and then how that TikTok initial like point of awareness or point of engagement with the brand kind of stems into the brand becoming more socialized in an organic way among friends. So, a friend group, somebody in in either my son or daughter’s friend group might see something on TikTok and then they talk about it and then that becomes then socialized throughout their friend group. And then eventually it kind of crosses friend groups in the school and they basically choose those products based on that and they experiment with them. And sometimes they have a great experience. Other times they discover, sometimes the hard way, well, wait a second, I guess a skincare product that worked on my friend doesn’t necessarily work on me. So, it’s kind of an interesting path to discovery. I would say TikTok usually is the point of discovery for a lot of brands—now Instagram becomes the point of validation. So, they kind of look to go to the Instagram page to see if the brand’s legit and get a sense of their lifestyle imagery because they really want to make sure that it’s the whole package before they transact.

MMG: Fascinating. Okay. Luc-Henry, do you have anything to add there in terms of the demographic shifts that we’re seeing in terms of beauty spend here?

LHR: Sure. Look, I think the first thing I’d say is that sort of across demographics, the definition of beauty is shifting and expanding into self-care, mental health, wellness in general, and kind of breaking away from traditional beauty standards. So, it’s sort of expanding to include ingestibles, other types of categories. And the way people look at it as just self-care is a bit different than just focusing on, you know, curing wrinkles. I think for one thing that’s been very important for investors also is seeing that millennial, gen X, baby boomers typically consider themselves pretty brand loyal when the new generation tends to explore more, be more playful with different brands. And obviously, we’re talking about Gen Alpha, the younger generation coming up and I think what’s interesting is of course, you know, they’re learning a lot about brands for the first time through social media, they’re heavily exposed to advertising on social media. That said, Gen Z, Gen Alpha tend to prefer shopping in store when millennials tend to prefer shopping online. So, I think that’s just an interesting shift where the store is coming back in vogue and I think that that has a lot of implications for retailers in the market. Those are some interesting trends there.

MMG: No, that makes sense. I can see why shoppers would want to physically see the product and I know in a lot of stores you are allowed to sample them and see textures and colors in real life. So, that does make sense though, as these younger shoppers are discovering products on social media, another trend in the beauty industry that is heavily related to social media is the huge rise of celebrity beauty brands, as I mentioned at the jump. And there have been some high-profile deals among strategics and private equity acquirers alike. You know, Elf Beauty acquired Haley Bieber’s brand Rhode recently, and L Catterton recently acquired Naomi Watts’ brand Stripes Beauty, so these transactions do seem to be pretty attractive to acquirers. What do each of you expect next year for celebrity beauty brands and what that might mean for additional deals moving forward? Luc-Henry, can we start with you?

LHR: I think that celebrities have always been a big part of beauty and historically there are a lot of fragrance brands, for example, that that were based on the likeness of celebrities. I think here we’re in a new age where the celebrity is more embedded in the brand, is more of an owner, a bigger role in building the business, it’s not just a poster or just a marketing gimmick. There’s a lot of that still. So I think that’s where it bifurcates is some of these brands are almost quick wins and may not be as intentional versus others have really been built in a way that although the celebrity is a big part of it, the brand is primary and they try to build it so that over time the celebrity is not as front and center. And I think that’s where we want to see more value creation over time. Businesses that could actually be acquired, you know, could you imagine this brand existing without a celebrity or with a much smaller involvement or front-facing presence of that celebrity? Ultimately, the risk investors see is being attached so tightly to a celebrity means there’s reputational risk, there’s potential wrong thing that’s said, wrong thing that’s posted online that could have an adverse impact on the business, or the celebrity loses relevance over time. And so, you know, we’re still pretty cautious about investing in celebrity brands given those types of risks. But they can be tremendously successful. It’s about picking the right ones.

MMG: That’s an interesting point, Luc-Henry, I want to stay with that for a minute because it sounds like what I’m hearing from you is that consumers today may be exposed to a brand that is backed by a celebrity or launched by a celebrity, but just because a celebrity like Haley Bieber is offering this, let’s say lip liner, it doesn’t necessarily mean the consumer is going to trust that this will be the highest quality. So, these brands cannot fully lean on the celebrity factor to build value and develop trust with consumers. Is that fair to say?

LHR: I think, you know, the celebrities can be really helpful in cutting through the clutter and leveraging their awareness and social media platforms to get the eyeballs and get trial and the game then is can you build a loyal following year after year where consumers come back, and that works for every brand. You know, trial is one thing. It’s really in the loyalty that the value is created.

MMG: Absolutely. Marty, how about you? What are you seeing in terms of celebrity beauty brands right now and what that might mean for M&A moving forward?

MO: Yeah, I completely agree with Luc-Henry. You know, the product really has to stand on its own first and foremost. And I think what the most successful celebrity beauty brands have done in the market now is they’ve really prioritized putting the product first and the people first in their organization. So, it’s not just a matter of use of likeness and sort of putting out a product that you might get some trial on because your name’s behind it. If I really boil it down to the brands that are successful, they develop products that are somewhat differentiated and addressed a market need. And I think that business fundamental has really built and embedded in the most successful celebrity brands and they built out the right management teams around them. So, when that celebrity gets behind the brand and they start amplifying their message to their extended audience and followers, it really means something because the product stands for something and the consumer really understands how the celebrity’s likeness is embedded in the product and how that translates into a need that they might have. So, I think there’s the modern celebrity brand is a product that really has all the benefits of what some of the most successful indie beauty brands may have had in terms of coming up with that point of difference. But then they also have the benefit of a much larger audience to market to given their reach, whether that’s on social media or through other channels that they might communicate their messaging to a broad audience. So, it’s really kind of the best of both worlds. What gets particularly challenging, to Luc-Henry’s point, is when you go to transact and all your likeness is tied up in the brand, it’s sometimes very hard for a buyer to dig in and understand what the latent equity is of the brand, if the celebrity were to step away, what does that really look like? And what does the brand look like in terms of its evolution under the new ownership structure? That being said, I think there are going to be meaningful paths forward and just how these brands were formed, I think there’s going to be creativity on the M&A side to basically address a lot of those concerns because there’s just too many dollars being generated by them to leave that opportunity on the table for strategics who are really looking to acquire for growth.

MMG: This certainly is a market right now for creative dealmakers, I would say. Now as we begin to wrap up our conversation, we want to talk about what all of this might mean for potential acquirers. So, for our audience and our listeners of middle-market dealmakers who might be interested in acquiring a beauty brand, celebrity or otherwise, what are some unique considerations to keep in mind? Marty, as you mentioned at the top of our conversation, you played a key role in the Fromm Beauty deal, the acquisition by Firelight Capital Partners in 2024. So maybe you could kick us off with your perspective.

MO: I think, runway is the biggest thing in terms of whether it’s a private equity investment or a strategic acquisition. What are some very clear paths to growth that you can see coming to life under your ownership? And I think that’s true whether you’re a private equity firm or you’re a strategic, and then obviously with crafting that vision, you really have to establish the right team in order to bring that to life as well. And I think those two factors are the biggest aspects of a beauty investment. And then I think one level deeper in that is you really have to test whether or not the brands are strong enough to bring that investment thesis to life. And I think with the right vision, the right team, and the right brands, you can do very well in beauty investments. I mean, the margin structures are very attractive. You do have a little bit of margin of error to test and learn on some things which makes the category so attractive. And those three factors are really key in terms of identifying an attractive asset to invest in and grow.

MMG: All right. Luc-Henry, close us out here. What are some unique considerations for deal makers interested in the beauty industry?

LHR: It’s a very rich space with a very rich ecosystem. I think that the first driver, the fundamentals have stayed the same for a long time, but the most important is and remains the brand and its long-term potential. That is first and foremost what a strategic will ultimately be interested in, is a beautiful brand that has long-term potential and could live in their portfolio as for an extended period of time. And then, so you need the brand, you also need the numbers. I think that’s where we’ve seen more of a shift towards, at least from a strategic perspective, maybe larger scale transactions. The minimum scale has crept up. Gross obviously is the biggest driver of ultimate valuation, but it’s a balance with profitability. And profitability has been much more in focus over the last few years. So, at a certain scale, you do have to be within benchmark and only the combination of strong growth and attractive profitability will yield great outcomes. You know, at a deeper level, to take Marty’s expression, is I think a lot of focus on unique economics, gross margin, profitability, and online transactions are very important. And loyalty has become a big area of focus, testing, repeat sales, core analytics on digital businesses. Being able to prove that the consumer keep keeps coming back has become really crucial in any transaction. But ultimately, for investors, there’s an attractive, this remains a great area, very resilient, strong growth, strong margins, strong cash flows, and a very deep pool of strategics and private equity players who can ensure liquidity at the end of an investment period. So, it really is a unique area for investment.

MMG: All right. That’s Marty Okner of Fromm Beauty and Luc-Henry Rousselle of DC Advisory. Thank you both so much for joining the Conversations podcast.

MO: Thanks so much for hosting us.

LHR: Thank you very much.

This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.

The Middle Market Growth Conversations podcast is produced by the Association for Corporate Growth. To hear more interviews with middle-market influencers, subscribe to the Middle Market Growth Conversations podcast on Apple Podcasts, Spotify and Soundcloud.