Beauty Market Report – May 2023

Capstone’s Beauty Market Report Shows Continued Outperformance of the Broader Market

Capstone Partners latest Beauty Market Report highlights the sector’s resilience amidst mounting inflationary pressure and economic headwinds. Despite prevailing economic headwinds, the Beauty sector continues to exhibit remarkable resilience, positioning itself as an attractive market for middle market brands. In 2022, the sector experienced an impressive 11% year-over-year increase in product sales, defying eroding consumer purchasing power. This data signifies the sector’s recession-resistant nature, as consumers prioritize the Beauty space as an essential spend.

Amidst broader market fluctuations, the sector has consistently outperformed, with Capstone’s Beauty Index demonstrating higher-than-average trading multiples (16.5x EV/EBITDA) compared to the S&P 500 (13.5x EV/EBITDA) as of year-to-date 2023. This outperformance highlights the sector’s resilience and attractiveness for investors seeking stable returns. While Beauty M&A transaction volume softened in early 2023, privately-owned businesses can still leverage a seller’s market, as the sector’s healthy fundamentals provide a solid foundation for potential opportunities.

Healthy public trading multiples and strong consumer purchases have often provided tailwinds for consolidation activity, though lower Beauty transaction volume has defied that trend through year-to-date 2023. As sector fundamentals remain healthy, sector participants may be primed to see a resurgence in acquirer and investor activity in the second half of the year.

Also included in this report:

• How elevated financing costs and uncertainty in forecasting cash flows are reshaping acquisition priorities among financial buyers.
• Key sector transactions and commentary from Capstone’s Head of Consumer Investment Banking, Ken Wasik.
• Exclusive insights from private equity firm Yellow Wood Partners on their successful acquisition of Suave.

Capstone Partners’ Consumer Investment Banking Team provides M&A, capital formation, and financial advisory services to the owners of middle market businesses in the consumer and retail industries. Our team partners with leading mid-to-large sized consumer businesses that serve growing end-markets. For more information on the trends featured in our Beauty Market Report or to speak with one of our Consumer Investment Banking Team members about how to grow, value, and/or sell your company, we are here to help. Contact us today to start a conversation.