Podcast Summary: Inside Beauty’s 2026 M&A Pipeline

Podcast: The Business of Fashion Podcast
Date: January 14, 2026
Host: Sheena Butler Young
Guests: Brian Baskin (Executive Editor), Priya Rao (Executive Editor, Business of Beauty)

Overview

This episode of The Business of Fashion Podcast dissects the state of mergers and acquisitions (M&A) in the beauty industry as 2026 begins, with Executive Editor Priya Rao offering expert analysis on deal-making, distressed assets, and the shifting categories drawing attention. The team covers why some brands are being sold (and at hefty losses), what potential buyers are seeking, and how the market’s “hot” segments are evolving. The episode closes with a look at Drunk Elephant’s turbulent ride post-acquisition, and how the brand is fighting to regain its footing.

Key Discussion Points and Insights

1. Estee Lauder’s Portfolio Sell-off – What’s on the Block?

• What’s Happening: Estee Lauder is reportedly preparing to sell three of its best-known brands: Too Faced, Smashbox, and Dr. Jart.
• Reason for the Sale: The brands haven’t stayed culturally relevant; Lauder is refocusing on brands better positioned for digital and cultural moments and needs the cash to fund new acquisitions. (01:02–01:44)
• Packaging the Sale: The brands are being offered as a package to make them more attractive to private equity buyers, not because of portfolio synergy. “This is more about price than it is about synergies.” – Priya Rao (01:59)
• Financials: Combined sale price is expected in the “low nine figures”—far below their purchase price. Too Faced alone was bought for $1.45 billion; the current package of three would not recoup that sum. (02:42–02:50)

“This low nine figure number ... is not going to make up for what they paid, but it’s going to give Lauder more cash flow on their balance sheet.”
— Priya Rao (02:50)

2. Who Might Buy? The Reality of Today’s M&A Market

• Buyer Landscape: Most likely acquirers are private equity firms looking to extract value, since large strategics are focused on streamlining rather than expanding. (03:40–04:47)
• Value vs. Creation: PE tends to “squeeze out value versus creating value.” (03:52)
• Brand Potential: Dr. Jart could, with more innovation, ride the new wave of K-Beauty instead of lagging; Too Faced still has powerful hero SKUs with potential. (03:52–04:47)

3. Can Estee Lauder Do It Right This Time?

• Lessons Learned: Lauder’s more recent investments, such as in Deciem (maker of The Ordinary) and Le Labo, have flourished because of greater autonomy for acquired brands’ leadership and strategic investment over time—a possible playbook for future deals. (05:08–06:14)

“Deciem sells more skincare products than all of Estee Lauder’s other skincare brands combined, which is insane.”
— Priya Rao (05:08)

“There’s almost a new Estee Lauder and an old Estee Lauder … one is doing really well and one of them maybe has some things to work out.”
— Brian Baskin (06:14)

4. What’s Desirable vs. Viable: Beauty’s Segments in Demand

• Makeup Redux: The market is saturated with color brands—buyers are hesitant to invest unless a truly standout brand emerges. Brands “on the market” too long risk diminished valuation, compared to stale real estate listings. (09:06–10:08)

“There’s so much optionality … and it’s a complicated business, probably the most complicated in beauty.”
— Priya Rao (10:08)

• Fragrance, Hair, and Body Care: These smaller categories are now hot growth areas for M&A, especially for strategics looking for incremental value rather than risky, crowded makeup brands. (10:44–11:23)
• Hair Care Standouts:
  • Amika—top dry shampoo at Sephora, now entering Ulta, poised for major growth. (11:32)
  • Not Your Mother’s—mass market, long-standing, focused on styling, with room to expand into higher-revenue segments like shampoo and conditioner. (11:32–12:41)
• Fragrance Focus:
  • Parfums de Marly has transitioned from niche to highly desirable by strategic buyers due to strong business growth and niche appeal, reminiscent of Byredo and Le Labo’s paths. (13:08–13:34)

5. Factors Slowing M&A: What Will It Take to Spark Deals?

• Execution Gap: There’s increasing chatter but slow deal closures. Key factors holding up transactions:
  • Solid leadership teams
  • Profitability, top-line growth, and clear expansion runways
    (14:24–15:33)
• Movement Catalysts: Big deals occur when brands tick all those boxes—recent examples:
  • Rhode (May 2025)
  • SpaceNK by Ulta (Summer 2025)
  • Dr. Squatch by Unilever

6. Cautionary Tales: The Drunk Elephant Saga

• Acquisition Background: Drunk Elephant was acquired for nearly $900 million as a “cult” clean beauty brand (2019), then faced setbacks as its brand messaging lost focus. (16:05–18:11)
• Sephora Tween Controversy: The brand, via colorful marketing, unintentionally attracted pre-teens, alienating its original Gen X demographic. “Should tweens be using skincare for 40-year-olds?” became the defining question. (16:05–18:11)
• Revamp Strategy:
  • Stripping away excessive color in visuals; focusing on mature, understated imagery.
  • Tagline shift to “Please enjoy responsibly”—a cheeky nod to the brand’s adult origins.
  • Highlighting efficacy, clinical results, and active ingredient messaging.
  • Some inventory/operational recovery: sales declines less severe after new inventory discipline (from –65% to –49%). (18:28–21:29)

“They are really paring back what their look and feel looks like. The bottles are the same, packaging is the same, but there’s not color everywhere.”
— Priya Rao (18:28)

“The tagline is genuinely clever … but I do worry whenever a brand with a really distinct identity starts putting a lot of beige and muted colors and stripping away what made them distinctive in the name of rebranding.”
— Brian Baskin (20:17)

Notable Quotes & Memorable Moments

• On declining values:
  “They paid $1.45 billion for Too Faced…this low nine figure number…is not going to make up for what they paid.”
  — Priya Rao (02:50)

• On big-brand strategy:
  “There’s almost a new Estee Lauder and an old Estee Lauder…and it seems like one of them is doing really well and one…maybe has some things to work out still.”
  — Brian Baskin (06:14)

• On color cosmetics glut:
  “It’s kind of like a house: why am I going to buy this house at a premium price when I could be buying at a discount and I should be buying at a discount?”
  — Priya Rao (09:06)

• On why deals stall:
  “Do all these brands have the pieces? Are they profitable? Do they have top-line revenue? Is there room to grow and do they have a strong team to make this deal happen?”
  — Priya Rao (14:24)

Important Timestamps

• Estee Lauder brand sale scoop – [01:02]
• Justification for brand package, lack of synergies – [01:59]
• PE as buyer, value extraction – [03:40]
• Recent success stories (Deciem, Le Labo) – [05:08]
• Beauty market over-saturation, parallels to dating – [09:06–10:08]
• Hot categories (hair, body, fragrance); brand examples – [11:32–13:08]
• Parfums de Marly as fragrance M&A example – [13:08–13:34]
• What would accelerate M&A activity? – [14:24]
• Drunk Elephant’s boom and bust post-acquisition – [16:05–20:43]
• New approach, balancing distinctiveness and maturity – [20:17–21:29]

Conclusion

The episode provides a sharp, candid look at why 2026 is shaping up to be a volatile year in beauty M&A. Brands face tougher scrutiny on profitability, leadership, and cultural connection. Old standouts like Drunk Elephant and Too Faced face “cautionary tale” status, but new growth may be found in less crowded categories. Despite swirling M&A rumors, actual deal flow hinges on discipline, planning, and being truly ready for the next wave.

Catch Priya Rao’s “Full Coverage” newsletter on The Business of Fashion for ongoing analysis of the evolving beauty business.