BeautyMatter Deal Index Q3 2022

During the third quarter of 2022, the BeautyMatter Deal Index tracked 67 deals, a 27% decline from Q2 2022 and a similar decline year over year. In the context of the unprecedented amount of deal activity we saw in 2021 and the early part of 2022, this decline indicates a marked shift in investor and strategic appetite for beauty and wellness deals. Seen against the context of historic, pre-pandemic trends, however, Q3 2022 deal activity was still above average and shows that investors, while more cautious, remain enthusiastic about the prospects of earning meaningful returns from beauty and wellness dealmaking.

Growth investments (seed, venture, minority stakes) have continued their dominance of deal activity during the third quarter, comprising 54% of deals, down from 61% last quarter. M&A (traditional mergers, acquisitions, and majority stakes) comprised 42% of deals during the quarter, up from 37% last quarter. Given the extreme volatility in the public equity markets, it’s not surprising to see that the industry saw zero traditional IPOs during the quarter. But traditional IPOs have always been a bit of a rarity for beauty and wellness brands given the relatively small scale of brands that would qualify for a public market listing and the small number of acquisitive strategic players looking to bolster their brand portfolios through acquisitions. Of particular note was news about two SPAC deals during Q3 2022, despite falling out of favor with investors last year.?Waldencast’s SPAC IPO of Milk Makeup and Obagi?successfully closed during the quarter, but?Bright Lights Acquisition Corp’s deal with Manscaped?was scrapped in late August due to “unfavorable market conditions.”

During Q3 2022, about 50% of deals occurred in the retail (13%), skincare (15%), and supply side (21%) categories. Year to date, the strongest category performers have been personal care (+64%), color cosmetics (+55%), skincare (+16%), and supply side (+4%). Supply side deals remain the lion’s share of deal activity in 2022, as they have been for the past two years, with M&A and consolidation fueling transactions. This reinforces the thesis that size and scale drive the economics of the supply side of the business. Deal category laggards in 2022 include health + wellness (-73%), fragrance (-56%), professional (-41%), and retail (-20%). In the case of fragrance, the lack of deals is likely the result of too few deal opportunities of scale to fuel deal growth in the category.

Beauty Deals: Investment + M&A Transactions Q3 2022:

• 116-pages covering deals across the beauty and wellness value chain
• Easy-to-reference charts including 67 transactions, organized by category with high-level details and financial players involved
• Overview on the state of the industry for the quarter from BeautyMatter and asset-based lender, Rosenthal & Rosenthal
• SEO trend report from machine intelligence platform, Spate
• Tribe Dynamics’ analysis of EMV on key deals
• Deal flow chart - who invested in what in Q3
• Recaps and details of 67 individual transactions
• List of angel investors active in Q3
• List of private equity and venture capital firms active in Q3

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