Beauty remains one of the strongest corners of the consumer economy heading into 2026, and the latest Capstone Partners analysis shows that merger and acquisition activity is holding up far better than in other retail categories. While overall Consumer deal volume has fallen, beauty brands with strong unit economics and compelling stories continue to command premium valuations and attract both strategic buyers and financial sponsors.
Consumers trade down in price, not in performance
Despite inflation and wage pressures, U.S. households remain relatively healthy: consumer net worth rose 49.7% between Q2 2020 and Q2 2025, while the Consumer Price Index increased 25.2% over the same period. Lower-income shoppers have faced tighter budgets as wage growth for the bottom 25% of earners slowed from 7.2% in early 2023 to 3.6% in August 2025, prompting closer scrutiny of discretionary spending.
That tension is reshaping category mix rather than killing demand. Mass-market beauty sales grew 4% year over year to $34.6 billion in H1 2025, while prestige sales growth cooled to 2% to reach $16 billion. Consumers are trading back into masstige and mass, but they are not lowering their standards: 63% say premium beauty is not necessarily higher performing than mass products, and 56% of beauty leaders expect perceived value to be the dominant theme shaping the sector in the coming years.
How brands are repositioning for value
With value and efficacy in the spotlight, large groups are actively reworking pricing and pack architecture. Stéphane de la Faverie, Estée Lauder CEO, said, “You’ve seen the new foundation of M-A-C Studio Fix that we’ve decreased the price. We’ve relaunched the DML with a new SPF [sun protection factor] product in Europe, where we also decreased the price and we’re seeing the momentum, a lot more consumers are re-engaging with the brand.”
Beauty M&A: resilient now, set to accelerate in 2026
Beauty deal volume has dipped only 6.7% year over year to 56 transactions YTD, versus a 24.2% decline for the broader Consumer industry, underlining the sector’s resilience. Strategic buyers remain active: their transactions are up 22.9% year over year to 43 deals YTD, with private strategic buyers increasing from 30 to 34 deals and public strategics completing 9 deals versus 5 a year earlier.
High-profile portfolio moves are also creating a “target-rich” environment: LVMH is reportedly exploring a sale of its 50% stake in Fenty Beauty, while Kenvue is weighing a divestiture of parts of its Skin Health & Beauty unit, including brands like Clean & Clear and Maui Moisture. These potential disposals should open fresh opportunities for acquirers looking to add scaled, recognisable names at attractive entry points.
L’Oréal, niche fragrance and blockbuster deals
L’Oréal has been one of the most active consolidators in 2025, spanning divestments, scale acquisitions, and long-term licensing plays. In March 2025, it agreed to sell Carol’s Daughter back to its founder, Lisa Price, and entrepreneur Joe Wong. Then, in June, it acquired Medik8 for $1.1 billion and announced the purchase of haircare brand ColorWow.
In November 2025, L’Oréal struck a $4.7 billion deal with Kering that combines the acquisition of Creed with a 50-year exclusive beauty and fragrance license for Gucci, plus similar licences for Bottega Veneta and Balenciaga. The transaction gives L’Oréal a major position in niche fragrance via Creed, an area the group previously called “underpenetrated,” while locking in decades of runway in luxury fragrance and beauty.
Sector-wide, beauty targets are still commanding rich valuations: M&A is averaging 14.9x EV/EBITDA in YTD 2025, more than five turns above the 9.8x average for the wider Consumer industry. Skincare and fragrance remain the hottest categories, particularly brands with clear adjacencies for category expansion.
Private equity: from pause to platform building
After a busy 2024 for platform creation, private equity buyers have stepped back somewhat in 2025 as macro uncertainty and exit timing clouded visibility. Direct investments are down 55.6% year over year to 8 deals YTD, but the number looks more measured when viewed against last year’s record 21 platform deals.
Recent activity shows what sponsors still want:
- TSG Consumer Partners is acquiring fragrance brand Phlur, which is expected to reach over $150 million in U.S. retail sales by 2025, with distribution across Sephora, Amazon, and other partners.
- Bansk Group is taking a majority stake in barrier-focused skincare brand BYOMA, which pairs clinical testing, accessible pricing, and broad distribution via Target, Ulta, and others.
These platforms set the stage for more add-ons in 2026. With the U.S. Federal Reserve having cut rates by 150 basis points across five moves since September 2024, and private credit still offering ample leverage on borrower-friendly terms, Capstone expects sponsor dealmaking to re-accelerate as confidence and exit pathways improve.
