Look out strategics. There are new, formidable competitors on the beauty M&A scene: family and individual investors.
While some are taking minority stakes in or wholly snapping up indie brands, others are willing — and able — to shell out up to billions for major acquisitions.
This year, all eyes were on the Aesop, valued at more than $2.5 billion, which ultimately signed an agreement with L’Oréal. But in the latest stage of negotiations, the Courtin family, which owns Groupe Clarins, was vying against the world’s largest beauty company for the Australian beauty brand through its investment arm Famille C Participations.
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Famille C Participations has been active in beauty as of late. In March 2022, it acquired the buzzy clean brand Ilia and in April of this year it snapped up Pai Skincare.
And the Courtin family is not alone. Caudalie founders Mathilde and Bertrand Thomas invested an estimated 1 million euros, according to industry sources, in Talm, a high-end dermo cosmetics brand in the maternity space, in May. And Natalia Vodianova, married to LVMH Moët Hennessy Louis Vuitton scion Antoine Arnault, and her business partner Timon Afinsky took a minority stake in Decree skin care in June.
“There’s greater availability to families and individuals on some deals than previously,” said Sam McKay, founder and partner at Point King Capital.
The deal-making landscape has changed dramatically due to a confluence of factors.
Twenty years ago, barely anyone was looking at beauty investments — especially in the niche category. Since around 2010, however, a lot of private equity and venture capital has been poured into consumer goods, such as tech, which is cyclical, and fashion, which can be risky. Beauty can offer great returns, and today there are many emerging brands showing value-creation potential. So investors have taken note and are investing more money into the space.
“Luxury and beauty, and tech, are the two categories that offer the highest margins when you are successful — and do not require massive capital,” said Joël Palix, founder of boutique consultancy Palix Unlimited. “Luxury and beauty are recession-proof, showing incredible resilience year after year, so this makes the category very appealing to individuals and family investments.”
In tech, a sector that recently imploded, many people had their investment exposure in companies through funds, rather than individual positions. Therefore today, some of them are looking more for direct investment opportunities, without the volatility of monthly or quarterly reporting.
“They often prefer to invest directly in a private opportunity, rather than always being in a blind pool structure,” added one industry expert. That is where limited partnerships raise funds from investors, but don’t reveal where their money will be placed. “I’m seeing that trend continue, where family offices want to do more direct investing,” said the expert.
Wealthy families have gleaned a greater understanding about the beauty category — where some earlier stage businesses have demanded huge valuations — since, in part, it has been more widely covered by general news outlets. They increasingly realize they do not have to just rely on standard private equity.
“There is a greater level of sophistication within family offices, in terms of their ability to better evaluate investment opportunities. Some of those are proprietary in nature,” said McKay.
A number of family offices are coinvesting, banding together and sometimes offering different expertise. The family offices that invested in Biologique Recherche in fall 2019, for instance, included the Van Rappard, Christopher Descours and Frère family offices in Europe, alongside Peter Brabeck-Letmathe, the former chief executive officer of Nestlé Group.
There remains great room to grow. “Beauty is still relatively unknown within the family office environment,” said the industry expert.
Meanwhile, the availability of beauty investment opportunities has increased, in part due to company founders realizing they prefer to avoid institutional fund structures, where they are forced into the timing of a liquidity event or a sale that may differ from their own view regarding how long they want to hold an asset. “Typically, families or family offices are more patient capital,” said McKay.
As people’s net worth has been expanding, the threshold to entry for investors into beauty has lowered, starting around 10 million euros to 15 million euros today, according to industry experts.
All this has helped change the game.
“The world is starting to collide between professional institutional investors and family office, high-net-worth investors,” said McKay, who has seen the phenomenon increase over time.
According to Ariel Ohana, a cofounder and principal at boutique investment firm Ohana & Co., there are three types of family investors in beauty. The first are second-generation families that own incumbent beauty brands, such as Famille C Participations, William Fisher family’s Manzanita Capital and the Wertheimer-Heilbronn family’s Mousse Partners.
“There is a second, more recent group, which consists of entrepreneurs who have recently sold their businesses and are reinvesting in the space,” said Ohana. “It is very similar to what we’ve been seeing in the tech space for decades.”
In this category are people such as Christophe Cervasel and Sylvie Ganter-Cervasel, cofounders of Atelier Cologne, which was sold to L’Oréal in 2016.
“The trend of entrepreneurs reinvesting in the industry is definitely gaining momentum,” said Ohana. “This is as much driven by the very rational idea that you should invest in things you are good at, as it is driven by a genuine desire by entrepreneurs who cashed out to support fellow entrepreneurs.”
“It is a healthy ecosystem, where some money is recycled and investors better understand the space now,” said Palix.
Seasoned entrepreneurs can help counsel newer entrepreneurs, especially as they scale their businesses from 10 million euros to 100 million euros in sales, and their roles evolve.
“Often, entrepreneurs are passionate about brand and product, but they’re not really good at human resource management, team-building and operational supply-chain scaling,” said one insider. “They want to spend their time innovating.”
Ohana outlined the third category consists of prominent, non-western families making investments in western brands. Here, some examples are the Cheng family, based in China, which is investing through C Ventures and New World Ventures. In the Middle East there is the Chalhoub family’s Chalhoub Corporate Ventures & Acquisition fund.
The Ohana family itself has recently formed a dedicated family investment vehicle.
“We are really just looking for inspiring entrepreneurs,” said Ohana. “I could tell you we are looking for white space or innovation, but really, we believe that great entrepreneurs can bring a novel approach for consumers, even in the most saturated spaces.
“One thing we do require for family investments is a commitment to a cleaner and fairer world,” he continued. “This can be done through the use of clean ingredients, or sustainability in packaging or materials, or giving back to the community.”
There are different ways to sniff out hot brands. Famille C Participations executives take a hands-on approach to reconnaissance. “As soon as I see a brand I like, I test the products myself,” said Prisca Courtin, founder and CEO of Famille C Participations. “Then, if I like them, I pass them to Clarins R&D [research and development]. There it is either ‘yes’ or ‘no.’ It is scientific,” she explained, adding that strategic filter phase is rigorous. “It’s important for me to have that opinion.”
Should the products pass muster, Courtin further examines the brand — its profitability and the market it is in. “We study the potential and immediately look at the synergies there could be with Clarins,” said Courtin. “We like to go for brands that are complementary, but don’t do exactly the same thing and have a common DNA.”
Brands presented by Courtin are voted on by her family and some other executives, including Groupe Clarins CEO Jonathan Zrihen, who meet weekly. The majority prevails and should the ayes have it, which has been the case in each instance so far, a classic acquisition or minority investment process ensues.
“We don’t act at all like a fund,” said Courtin. “We have the advantages of an investment fund, because we have significant financial support, but we don’t have the disadvantages of a fund with short-term objectives.
“We have very long-term vision,” she continued. “We like to leave the companies we buy independence, leave them their autonomy. That’s why we don’t integrate them directly into Clarins.”
Famille C, begun in 2019, is the holding company owning Clarins and all of Clarins’ assets. Within this, there is Famille C Participations, which invests the family’s assets. Its deal tickets can range from 100,000 euros to billions of euros. It invests in diverse companies, although the bulk are beauty-related.
“They are tools that help us in our beauty business,” said Courtin, adding the overarching goal for Famille C Participations is to become the leader in responsible beauty, with a coherent brand portfolio. It has, for instance, taking a minority share in Launchmetrics.
“It’s a platform that allows us to identify micro-influencers for launches,” said Courtin.
Investment has also been made in Lumapps, a corporate intranet.
“They had an application we found very interesting, especially at Clarins, because we like it when our employees are brand ambassadors and talk about Clarins,” she said.
Mirakl, which Courtin called a creative agency 2.0, is a tool for creating digital marketplaces. Famille C Participations also invests in biotech, to find alternatives to certain beauty product ingredients.
Some other investments are in Ecovadis, the universal sustainability ratings provider, allowing companies to manage their networks’ performances both upstream and downstream, and Le Collectionist digital platform, which enables people to rent luxury villas throughout Europe.
“With them we are thinking about a partnership to make Clarins amenities,” said Courtin. “They also want to offer spa services to their customers.”
On the pure beauty front, Famille C Participations owns Pai and Ilia, and has made minority investments in Joone and Ceremonia, all prestige brands.
“There are obvious and interesting synergies [with them],” said Courtin, adding Famille C Participations is betting on brands that have staying power over time: 30, 50 and even 100 years.
For Ilia founder Sasha Plavsic, Famille C Participations was something of a homecoming.
“The brand needed to find a home — one that was familiar,” said Plavsic. “I very much admire the legacy of Clarins, and what the family has built over the last 70 years.
“Their knowledge of growing a beauty brand one country at a time is extremely powerful,” she continued. “But they did it well. Ilia is still a young brand, and we have the opportunity to learn so much from this partnership.”
Famille C Participations has been involved, as well, with numerous funds from its start, and has purchased land and real estate, such as a vineyard. “It’s a strategy I have from a heritage point of view,” said Courtin. “It’s important to have land assets.”
The aim is not to invest in a lot of companies, although some beauty categories of interest include prestige hair care, acne solutions, men’s skin care and sun filters. Countries on her radar for sourcing brands include Australia, India, Japan and Korea. “We just want to have things with a common thread,” said Courtin. “We really want to invest in brands that innovate, have quality formulas and — above all — are embodied by founders who want to accompany us in the adventure.”
With the investments, she aims to make a positive contribution from a sustainable development perspective and raise eco standards of the beauty industry at large.
Another goal is not to squash the brands invested in. “We let them be nimble,” said Courtin. “The founders are still in control. We provide them with all the strategic resources they will need.”
The founders can look for levers of growth and synergies with Groupe Clarins and Zrihen. They and Famille C Participations executives make joint decisions, but are still given a lot of independence, said Courtin.
“It’s important for us,” she said, adding that the idea is to invest for a few more years as Famille C Participations is doing, then continue growing those companies, enabling cash generated from them to lead to new investments.
“So that it’s a virtuous circle,” said Courtin. “That is the idea for the future generations. Leaving money and brands is not what’s important. What counts is doing it with conviction, to have contributed positively and to tell ourselves we are proud of what we’ve done.”
Manzanita Capital, founded by William Fisher, the son of Gap founders Donald and Doris Fisher, has been actively investing in the beauty industry since around 2002. “We’ve always thought about building great brands, finding incredibly unique and strong entrepreneurs, and partnering with them,” said Andras Szirtes, managing partner at Manzanita Capital, whose portfolio includes Diptyque, Malin + Goetz, Space NK and Susanne Kaufmann.
Manzanita does not have a timeline for its investments, so rather is “evergreen.” That is to say, the fund isn’t looking for an exit as it invests in a company. It is contrary to how many other investors operate, since they must return money to their investors by a certain date.
“We’re looking for just not a good brand, or a hot brand, because trends come and go,” said Szirtes. “The filter that we use all the time is do we think this brand is going to be around 10, 20 years from now?”
This echoes the stance of Courtin and other investors. Manzanita also hones in on whether a product is differentiated enough and whether the entrepreneurs behind a brand have both the know-how and determination to go the full distance.
It helps with capital, contacts and know-how, and is under no pressure to ink a lot of deals. “It’s hard to find that unique combination of amazing products, incredible brand and amazing people,” said Szirtes.
Manzanita then often holds onto investments for a long time. It invested in Diptyque in 2006 and Space NK in 2003. “The companies have grown tremendously since those times,” said Szirtes. “We are looking for the entrepreneurs who really value the journey together, as well as the final outcome. Fortunately, there are lots of people like that, and they understand the real magic happens when you do everything well.”
Manzanita, which backed Swedish fragrance and lifestyle brand Byredo starting in 2013, sold the company to Puig, the Spanish family-owned beauty and fashion company in late May 2022. The office also sold Eve Lom to Yatsen, and Lipstick Queen was purchased by Morphe parent company, Forma Brands.
Among the challenges for family or individual investors are that some have a lack of expertise and experience in the beauty industry, which can complicate sorting through the vast number of opportunities presented.
“They often ask advisers to help navigate the category and represent them on the boards of the companies they invest in,” said Palix.
It can also be tricky to know when to bow out of an investment. “When you track through the life cycles of what these family offices do, quite an important consideration is that if you’re long-term and evergreen, and don’t ever have to sell — then when do you sell?” said another industry expert.
This can be a humbling experience, when a family office understands it is no longer the right shareholder for a business — since that activity has either gotten too big or is growing faster than the family office can properly handle.
“That’s really the thinking for these family offices, to know when to step away,” the executive said, adding that can be difficult when a company is growing by strong double-digits per year.
The inverse situation — when business isn’t going well or the relationship between investor and founder sours — is challenging, too. That can be disruptive to business decision-making if the investor disengages, or a question mark hangs over how and when an exit might take place.
Still, there’s a palpable lather of excitement among individual and family beauty investors.
Vodianova and Afinsky, former purpose-driven tech start-up founders, have been investing together for 10 years. Their priority is taking minority stakes in digital start-ups — mainly apps — in the spaces of skin and face, well-being and fashion. They have dubbed their company Supernova.
“We understood how difficult it is, how incredible it is” to be an entrepreneur, said Vodianova, explaining that journey gave them insights useful for active investors, who are there to advise or listen to founders.
“Sometimes they just need to run their ideas by people who have a wider view and who may give them unexpected feedback from a knowledge of seeing and hearing quite a lot,” she continued. “As advisers and investors, we look for founders that understand that there needs to be vision and impact, but it has to go hand-in-hand with building a successful business.”
Their checks range from 50,000 euros to 750,000 euros.
“We always invest very early, so they’re very high-risk investments. That’s why we’re so involved because, of course, we want these investments to succeed,” said Vodianova.
Their first one was in PicsArt, an app for manipulating photographs on social media, which is now a unicorn, boasting more than 1 billion creations daily. Soon thereafter, they took a stake in Flo, an app to track a person’s ovulations and periods. “Female-centered health is something very under-researched, underfunded,” said Vodianova.
Flo, too, has taken off and is now used by more than 280 million women. “Flo became this incredibly wide-purpose, very effective health tool for women in general, because it’s taking you from your first period all the way to menopause,” she said.
Their most recent investment has been in Soula, an app billed to be a virtual doula, an AI-powered assistant for pregnancy, birth and postpartum. “Globally, women face big issues — [including] mental health issues — when it comes to pregnancy,” said Vodianova, adding of Soula: “You can ask any question. It has this very humane language, it doesn’t feel clinical or alien. It speaks to you like a doula, like a person.”
Pora, another investment employing an AI-powered scan of a person’s face, is said to be an unbiased, “smart skin care assistant,” able to help consumers make the right product choices for themselves. The duo’s most recent investment was in Decree, an inclusive skin care line created by Dr. Anita Sturnham. “What really struck me with Decree was this amazing approach to a simple beauty routine, with very good results, at affordable prices,” said Vodianova. “With her clinic, she’s seen thousands of patients. The journey is very honest.
“Still I think there is so much for them to do, in terms of the right kind of communication,” she said. “It’s fun to see the journey of a brand like this, which has just scaled in the U.K. and is now spilling over in other markets, which is quite a complicated journey. I hope that I will be able to help them with that.”
Vodianova said she and Afinsky never chase their founders. Rather, those are expected to ask for help if they need it and give updates. There is generally a call altogether once a month. “Sometimes we also connect the founders to each other,” she continued.
Other investments include in Lensa, an all-in-one image editing app that’s already helped create more than 750 million avatars.
Vodianova and Afinsky have so far invested in 32 companies, of which five are unicorns. “We are really fast at making decisions, because we are not a fund, and we don’t take other people’s money,” she said.
In terms of future investments, Vodianova is concerned about where people get their nutrients from. They continue watching the Web3 space, in which they’ve already invested in a start-up called Loóna, a sleep-enhancing app.
“I’m really proud of my female founders,” Vodianova said, citing as an example Rose Colcord, who created CouCou, a sustainable brand meant to be a hybrid of lingerie and underwear. “It’s really about building community, and this philosophy that you should be yourself every day.”
The Cervasels also have an eco-conscious bent. After selling their brand, they began studying naturopathy and started a family office, called Camélias, which was created to nurture socially conscious and environmentally responsible companies.
Since August 2016, Camélias has taken minority stakes worth between 50,000 euros and 100,000 euros in more than 30 businesses, mostly impact companies.
“We said we don’t want to leave the entrepreneurial world,” said Christophe Cervasel. “Still, today, I feel like an entrepreneur. One of the reasons is that we remain in contact with entrepreneurs. When you find good people with great ideas, you just want to help them.”
That is as the Cervasels were helped by dozens of business angels when they were starting out.
“It’s natural that we help these young people that are really willing to do something good,” said Cervasel. “Especially the ones who want to help the environment and create a better world.”
Their first beauty investment was in Aime Skincare, for inside-out beauty. It then put funds into What Matters, a sustainably minded, refillable organic skin care, personal hygiene and home care brand, and Jolly Mama, maternity-related snacks and supplements. Most recently, it funded Respire, a clean, natural hygiene brand. “There [remain] many things to do in beauty,” said Cervasel. “There is still a lot of potential to grow.”
In terms of their level of involvement, the duo might sit on company boards and consult — or not. “It really depends on the founders,” he said, adding that if one wants his advice, Cervasel explains: “I will speak as if your company was my company — I cannot do differently. And, of course, we are different, so then you are free to do something else.”
Another couple, the Thomases, founded Caudalie in 1995, which had estimated sales of $341 million in 2022 and is ranked 81st on WWD Beauty Inc’s list of top 100 brands globally.
“We don’t have an exit strategy,” said Mathilde Thomas, of her skin care company that is privately owned.
After returning to Europe a few years ago, following eight years abroad, she and her husband started looking and younger companies seeking their advice. “And we said, why not invest?” said Thomas.
They subsequently made three deals in the beauty space. The first was with Aime Skincare. The second one was with Talm, and most recently, the Thomases have invested in Skin & Out, a natural brand for treating adult acne.
The couple tends to invest in companies run by talented executives they’ve known. One of the cofounders of Skin & Out, Amélie Desazars, had worked at Caudalie, for example. “I know she’s talented. She is genuine, believes in very clean products that work, has exquisite taste and great sense of product development,” said Mathilde Thomas.
She meets every six weeks with Kenza Keller, Talm’s founder and CEO.
“These are real work sessions, very valuable for discussing the development of Talm and in particular all the issues inherent in a brand that is growing rapidly,” said Keller.
“Mathilde and Bertrand Thomas, beyond their financial support, accompany me on major issues of the brand: product, distribution, communication,” she continued, calling them “true mentors, who allow me to visualize my ambition for Talm and to articulate the strategy that will make it possible to achieve it in the years to come.”
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Some family and individual investors in the beauty space
Camélias: Family office of Christophe Cervasel and Sylvie Ganter-Cervasel
Headquarters: Luxembourg
Current Beauty-Related Investments: Aime Cosmetics, What Matters, Respire, Jolly Mama
EPI: Christopher Descours family holding
Headquarters: France
Current Beauty-Related Investments: Biologique Recherche, Bonpoint
Eutopia: Pierre-Edouard Stérin’s consumer investment arm
Headquarters: France
Current Beauty-Related Investments: Oh My Cream!, Laboté, Même Cosmetics, Merci Handy
Famille C Participations: Courtin family holding company
Headquarters: France
Current Beauty-Related investments: Ilia, Pai Skincare, Ceremonia, Joone
Impala: Jacques Veyrat holding company
Headquarters: France
Current Beauty-Related Investments: Augustinus Bader, Laboratoire Native (including Roger & Gallet, Lierac, Phyto and Jowaé), P&B Group
Manzanita Capital: William Fisher family’s fund
Headquarters: U.K.
Current Beauty-Related Investments: Diptyque, Malin + Goetz, SpaceNK, Susanne Kaufmann, Glossier, Unbound, A-Frame, SuperOrdinary, Sam McKnight
Mathilde and Bertrand Thomas
Headquarters: France
Current Beauty-Related Investments: Aime Skincare, Talm, Skin & Out
Mousse Partners: Wertheimer-Heilbronn family office
Headquarters: USA
Current Beauty-Related Investments: Ulta Beauty, Counter Brands (Beautycounter parent), Evolve by Nature, Bravo Sierra
Ohana family
Headquarters: USA
Current Beauty-Related Investments: What Matters, Face D, Angela Caglia, Fré
Redo Ventures: L’Occitane family office
Headquarters: USA
Current Beauty-Related Investments: Odacité, Alchemy 43, Loli, The Nue Co., Good Face Project, Dieux
Supernova: Natalia Vodianova and Timon Afinsky’s investment company
Headquarters: France
Current Beauty-Related Investments: Decree, Flo, Soula, Simple, Zing, Pora