The global cosmetics industry has seen an acceleration of mergers and acquisitions (M&A) throughout 2024 and into early 2025. Shaped by evolving consumer preferences, a heightened focus on sustainability, and technological innovation, the sector’s M&A activity reflects wider trends across global markets. As our director Peter Paradise recently observed in his analysis of legal and commercial M&A trends, dealmaking today demands an increasingly strategic and disciplined approach, especially in sectors like cosmetics where consumer loyalty, brand story, and innovation are key value drivers.

Below, we explore the major themes influencing M&A in the cosmetics industry and what the future holds for investors and brands alike.

1. Premium-isation and Strategic Portfolio Expansion

One of the clearest trends is the premium-isation of product offerings. Consumers — particularly in mature markets like the U.S., Europe, and Australia — are willing to pay a premium for quality, effectiveness, and exclusivity. Global conglomerates have responded by pursuing acquisitions that allow them to capture niche, high-margin segments.

• L’Oréal’s re-entry into dermatology is a prime example. In 2024, it acquired a 10% stake in Galderma, targeting the lucrative medical aesthetics space, including anti-wrinkle injectables. This move signals a strategic pivot back to dermatological expertise after its earlier divestment of The Body Shop and Galderma’s consumer division years ago.
• Similarly, Estée Lauder has invested heavily in clean beauty and biotech brands, acquiring start-ups focused on personalized skincare solutions driven by AI and genetic profiling. These acquisitions allow traditional players to remain relevant to a new generation of tech-savvy, health-conscious consumers.

As Peter Paradise notes in his previous article, in today’s market, sector-specific expertise and brand authenticity are often valued more highly than sheer scale, pushing acquirers to make more targeted, strategic moves rather than broad roll-ups.

2. Sustainability and Wellness as Core Investment Themes

Environmental and social governance (ESG) considerations now permeate every facet of corporate strategy, and the beauty sector is no exception. Consumers demand transparency, clean formulations, ethical sourcing, and carbon-conscious production methods.

• Unilever’s acquisition of Wild — a UK-based brand known for refillable deodorants — shows how sustainability is no longer a fringe consideration but a mainstream growth driver.
• The Tru Fragrance & Beauty purchase of Lake & Skye, a fragrance house rooted in wellness and mindfulness, highlights the convergence of cosmetics, self-care, and mental well-being — a space likely to see continued investment.

Notably, Australian consumers rank among the world’s most environmentally conscious, influencing local brands to emphasise sustainable packaging, vegan formulations, and cruelty-free certifications — factors that now directly impact valuation multiples during acquisitions.

3. Technology and Digital Transformation

The cosmetics industry has increasingly blurred the lines between physical and digital retail. M&A activity is being shaped not just by product innovation but by digital capabilities.

• Brands with strong direct-to-consumer (DTC) platforms, sophisticated data analytics, or AI-powered personalisation technologies are commanding higher premiums.
• Companies like Sephora (owned by LVMH) and Mecca Brands in Australia have been aggressive in expanding their omni-channel strategies, acquiring or partnering with tech firms to enhance customer experiences through virtual try-ons, AI skin diagnostics, and hyper-personalised marketing.

Tech-savviness is now an essential diligence factor: acquirers are scrutinising not just financials but also the target’s digital infrastructure and ability to leverage data for customer engagement.

4. Local Trends: Australia’s Unique Position

The Australian cosmetics market is strongly influenced by global trends but retains its own characteristics. Brands like Mecca Brands, Jurlique, and Aesop (prior to its $2.5 billion sale to L’Oréal in 2023) have built strong reputations globally for quality, innovation, and luxury.

• Private ownership advantages are a recurring theme. Mecca’s Jo Horgan recently emphasized the ability of private companies to maintain entrepreneurial energy, long-term brand integrity, and flexibility — critical advantages in a sector where trend cycles are fast and consumer tastes are fickle.
• Australian M&A deals increasingly emphasize cultural fit and brand story — acquirers seek not only profitable businesses but also authentic narratives that resonate with consumers locally and globally.

Meanwhile, Australian regulators, notably the Australian Competition and Consumer Commission (ACCC), have maintained a watchful eye on sector consolidation, ensuring that acquisitions do not limit consumer choice or innovation — a growing concern in niche beauty categories.

5. Private Equity: An Increasing Force

Private equity (PE) firms are playing a larger role in cosmetics M&A, attracted by strong margins, recurring revenue models, and defensible brand loyalty.

• PE players are often behind the rapid scaling of niche brands, providing capital for international expansion, digital transformation, and product line diversification.
• However, greater scrutiny is now being applied to growth assumptions: investors are wary of overpaying for brands that have momentum but lack operational robustness.

Interestingly, many PE firms are pursuing “buy and build” strategies — acquiring a platform brand and then bolting on smaller complementary acquisitions to create value through synergies.

6. Looking Ahead: 2025 and Beyond

Several emerging trends suggest that cosmetics M&A will remain buoyant, albeit with a sharper focus on quality and strategic fit:

• Biotech beauty, particularly DNA-based personalization and microbiome-friendly products, will attract both strategic and financial investors.
• Fragrance is undergoing a renaissance, with niche artisanal perfume houses becoming highly attractive targets.
• Women’s health and ingestible beauty (such as beauty supplements) are expected to be crossover sectors where cosmetics companies seek to extend their brand ecosystems.
• Asia-Pacific expansion remains a core growth lever for many Western brands, given the region’s rising middle class and appetite for premium beauty products.

Overall, in line with the themes identified by Peter in broader M&A activity, investors and strategic buyers are adopting a more cautious, disciplined approach, favouring profitability, innovation, and resilience over rapid scale or short-term growth.

Conclusion

M&A activity in the cosmetics industry is being reshaped by a confluence of forces: premium-isation, sustainability demands, digital transformation, and investor discipline. Successful acquirers in 2025 and beyond will be those who not only understand the nuances of brand loyalty and consumer identity but who also recognise that cultural authenticity and operational excellence are now non-negotiables.

The future belongs to brands that can marry science, beauty, ethics, and technology — and to investors who are wise enough to see the full picture.