Morphe owner agrees to a $690 million acquisition

Morphe Owner Agrees To A $690 Million Acquisition

Morphe, a Los Angeles-based cosmetics and beauty manufacturer founded in 2008, faced bankruptcy due to liquidity and operational issues resulting from the COVID-19 pandemic, changes in consumer beauty habits, and the termination of partnerships with certain influencers.

Forma Brands, Morphe‘s parent company, filed for bankruptcy in Delaware and had around $868 million of funded principal debt and interest obligations. In an effort to save the struggling company, Forma Brands agreed to a $690 million acquisition deal with lenders Jefferies Finance and Cerberus Capital Management.

The acquisition came after Forma Brands filed for Chapter 11 bankruptcy in January. During the bankruptcy proceedings, no better bids emerged, and Jefferies and Cerberus provided an additional $18 million of secured loans to support Forma’s cash reserves. Despite attempts to revive sales through partnerships with celebrities and influencers like Emma Chamberlain and Ariana Grande, the company continued to face financial challenges. In early January, Morphe closed all of its US stores, totaling around 20 locations.

Throughout 2022, the company focused on reducing its corporate headcount, cutting budgets for portfolio brands like Playa Haircare, and downsizing Morphe’s retail footprint. As Morphe tries to recover from bankruptcy, it faces a consumer base that is less interested in celebrity-backed brands and a shift in consumer preferences from color cosmetics to skincare products. Forma Brands, which generates about 80% of its sales from Morphe, also suffered from supply chain disruptions and reduced consumer demand for color cosmetics, causing revenue to miss internal planning by about 20% in 2021.

The acquisition by Jefferies Finance and Cerberus Capital Management offers a lifeline to the beleaguered company, once valued at $2 billion. However, Morphe will need to navigate the changing landscape of the cosmetics industry and adapt to new consumer preferences in order to regain its footing and thrive in the future.

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