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A growing number of beauty firms are looking to snap up — and hopefully, turn around — underperforming brands from both strategics and indie founders.

In 2025, beauty M&A was a tale of two extremes.

There were the buzzy, hefty transactions of red-hot assets like Hailey Bieber’s Rhode (acquired by E.l.f. Beauty for $1 billion), Medik8 (acquired by L’Oréal for $1.1 billion) and Touchland (acquired by Church & Dwight for up to $880 million), and on the opposite end of the spectrum, sales of once-buzzy but underperforming brands like Kate Somerville and Nudestix — with little action in the middle of the market.

Distressed sales like the latter are only likely to ramp up as major conglomerates look to optimize their portfolios while beauty grows ever-more competitive, and indie founders seek increased support for the same reason, experts say.

“There’s a lot of indigestion taking place among the larger strategics, some of whom just added too many brands to their portfolios in the five to 10 years leading up to 2021, when the frenzy of M&A activity across channels peaked,” said Andrew Charbin, managing director of consumer investment banking at PricewaterhouseCoopers Corporate Finance LLC.

Indeed, in recent months, it has been speculated that the Estée Lauder Cos. could be looking to offload brands including Too Faced, Smashbox and Dr.Jart+, and LVMH Moët Hennessy Louis Vuitton is exploring sale options for Rihanna’s Fenty Beauty, according to reports. In addition, in December, Pat McGrath Labs’ assets were marketed for sale after years of speculation over the future of the brand, once valued at $1 billion.

The realm of potential buyers for these brands is growing fast as players from private equity firms to operators and beyond look to grow their respective stakes in beauty, and in some cases, prep brands for future exits.

“There are buyers who are looking at some of these underperforming brands saying, ‘there’s still life in these’ — as long as the business has a good enough gross margin, they can figure out how to make cash,” said Ilya Seglin, managing director, consumer, retail and e-commerce at Cascadia Capital.

For years, industry observers have predicted an uptick in startup M&A activity, in part due to the limited number of companies going public. As the IPO dam finally broke in 2025, we didn’t see a huge surge in M&A dealmaking, but we did see a large spike in the known value of M&A deals.

Globally, in 2025 so far, there have been around 2,300 M&A deals involving venture-backed companies with a collective known deal value of more than $214 billion, per Crunchbase data. (It must be noted that most of the reported M&A deals do not have amounts, so the dollar amount is based only on the deals in which a value was provided.)

Interestingly, deal count was only up slightly, signaling much larger deal sizes. The dollar amount is up from a known value of $112 billion in 2024, for an impressive 91% increase.

The trend was similar in the United States, which dominated M&A activity, comprising about 73% of all transaction values and 56% of transactions alone, globally.

There was a known value of $157 billion across nearly 1,300 deals, compared with a known $79 billion across about 1,100 transactions in the U.S. in 2024. Around 37 of those deals were valued at $1 billion or more, per Crunchbase data.

Anuj Bahal, technology, media and telecoms deal advisory and strategy leader for KPMG US, is not surprised by the uptick in M&A deal volume and dollars.

“A healthy IPO market tends to increase M&A activity rather than reduce it,” he told Crunchbase News. “Many companies pursue dual-track strategies, simultaneously preparing for an IPO while exploring M&A, which gives them greater flexibility and leverage in negotiations. The threat of a public offering can be used as a bargaining chip to drive up a startup’s sale price.”

On top of that, he points out, a strong IPO market creates a new wave of cash-rich public companies that “immediately look to acquisitions to accelerate their growth,” ultimately stimulating M&A demand.

Google’s $32 billion purchase of cloud security unicorn Wiz marked the largest acquisition of a private, venture-backed U.S. company, not just this year so far, but ever. The next-closest deal historically, per Crunchbase data, was Meta’s 2014 acquisition of WhatsApp for $19 billion. Still, that deal alone wasn’t responsible for the large increase in value of M&A transactions this year.

The next-closest deal in 2025 was Naver Financial Corp.’s $10.3 billion buy of South Korea fintech Dunamu. After that came Thermo Fisher Scientific’s $8.87 billion acquisition of Clario.

In fact, M&A exit numbers this year are the highest ever for unicorn companies, with 36 deals in 2025 totaling $67 billion in value.

Other large transactions included:

Lukas Hoebarth, EY-Parthenon Americas technology sector leader, believes that strategic plays drove 2025’s M&A surge far more than distressed sales.

“Corporations are writing big checks for AI, cybersecurity, data acquisitions, and massive tech and talent deals,” he said. “These tech and talent deals used to be worth tens of millions, and now we are in the billions.”

Indeed, fear of missing out appeared to be a driving factor in a lot of M&A activity, especially when it came to AI. The sector also drove a flurry of acqui-hires.

“On the one hand, big corporates are snapping up seed/Series A startups for talent and tech — we can call that the AI acqui-hire trend. Many teams with fewer than 100 employees have landed $100 million-plus exits,” Hoebarth said. “On the other hand, a cohort of 3- to 6-year-old unicorns that stalled on IPO plans is finally selling.”

Looking ahead to 2026, he predicts that acquirers will likely increasingly focus on earlier plays — scooping up emerging tech before it scales, especially in high-growth sectors like AI and cybersecurity.

Lindsey S. Mignano, co-founder of SSM and a corporate attorney for startups and small businesses, agrees that more acquisitions are happening at seed and Series A, but believes that more value is being transacted at later stages.

“Acquirers are buying at an earlier stage to speed up to capability rather than build internally, as hiring the same team individually is slower and riskier,” she noted. “Seed and Series A founders are more willing to sell in light of the current financing environment and the fact that there is less stigma around a really early exit at present.”

Unless the financing environment picks up evenly for early-stage seed and Series A companies, she expects this trend to continue.

Not only did the ultra-competitive environment, especially in the AI and cybersecurity industries, drive more acqui-hires, but talent also played a larger role than ever in determining transaction value.

Itay Sagie, owner of Israel-based Sagie Capital Advisors, believes that in 2025, pricing has effectively been split into two markets: AI and everything else.

“In AI, talent and IP value often dominate, including outsized acqui-hires that would be irrational in other sectors,” he said.

However, in non-AI tech, pricing remains anchored in revenue multiples and public comparables, heavily influenced by unit economics and operational KPIs.

“Looking into 2026, I expect greater financial discipline across all sectors, including AI, with stronger emphasis on sustainable P&Ls and defensible unit economics,” he predicted.

KPMG’s Bahal said that while traditional valuation metrics such as revenue multiples still play a role, acquisition prices are increasingly being dictated by the strategic value of a company’s talent and its intellectual property.

“This fundamental shift toward valuing people and technology over pure revenue is the new reality in dealmaking, especially as the ‘acqui-hire’ trend accelerates to secure top engineering talent in high-demand fields like AI,” he said.

Unlike Sagie, he thinks this trend is not temporary.

“It is expected to intensify through 2026 as the war for talent and unique technological capabilities continues to be a primary driver of value,” he predicted.

Talent and technology weren’t the only things driving M&A activity.

In Hoebarth’s view, the most common trigger event in 2025 was a funding crunch. Because there is so much money flowing into AI companies, it can be easy to forget that a lot of other sectors are struggling.

“Many founders opted to be acquired when facing a down round or failed raise,” Hoebarth said. “We saw startup down rounds hit a decade high — about 16% of deals — this year, so rather than accept significant dilution, founders did a pivot to M&A. These down rounds get lost in the broader AI narrative, which continues to be very positive, for now.”

Mignano agrees. In 2025, the most common practical trigger that pushed early-stage founders to sell wasn’t a single dramatic event but a confluence of many, she said.

Those events include the inability to raise the next round at all or on good terms. If an AI company, the AI technology was not defensible “enough” to get it to the next round, and founder fatigue after a number of years where they have been financially strapped.

Another factor?

“Expansion and increased revenue metrics require a capital-intensive GTM build that the current investors won’t fund and that a possible acquirer may fund post-acquisition,” Mignano noted.

So what’s ahead for 2026?

Bahal believes that the trajectory of the M&A market in 2026 will be determined by the overall health and stability of the economy.

“A bull case would be fueled by the need to continue the digital transformation of every business, a favorable regulatory environment, falling interest rates and continued economic growth, which would give dealmakers the confidence to pursue strategic acquisitions, particularly in technology and AI,” he said.

Conversely, Bahal believes that a bear case would emerge from an economic downturn, marked by higher inflation or increased regulatory scrutiny and increased geopolitical uncertainty, creating headwinds that would cause both buyers and sellers to pause dealmaking.

Hoebarth notes that EY-Parthenon Americas is forecasting a modest increase in M&A activity in 2026, and definitely lower than what occurred this year. The U.S. M&A deal volume is expected to grow about 3%, following a 9% increase in 2025, according to their data.

In his view, bull case factors include easing monetary policy and continued lower interest rates, strong corporate balance sheets, significant private equity dry powder, and continued innovation in high-growth sectors like AI and cybersecurity.

Hoebarth believes that bear case factors include an economic downturn, trade and tariff uncertainty, tight funding markets limiting liquidity, and increased regulatory scrutiny, especially in China, the EU and the U.K., or geopolitical barriers slowing deal approvals.

“The elephant in the room is still the question of what happens with AI,” he said. “We do see early signs of a pullback in the AI space, which would have ripple effects far beyond the tech ecosystem.”

Sagie believes that if the macro environment “stops getting in the way, M&A activity will take care of itself.”

“Lower and more predictable interest rates, fewer regulatory surprises, and easing trade tensions would give boards and buyers the confidence to plan again,” he said. “When that happens, consolidation comes back naturally, not because companies are desperate, but because buying becomes a faster and less risky way to grow than building from scratch.”

The bear case is not about technology suddenly breaking, Sagie points out.

“It is about hesitation,” he said. “If rates stay high, geopolitical noise continues, or capital markets remain jumpy, buyers slow down. Decisions take longer, deals get smaller, and only the transactions with a very clear strategic rationale actually close. What separates the two is confidence. When executives believe they can underwrite the next three to five years with some degree of certainty, M&A moves quickly. When that confidence is missing, even good assets struggle to transact.”

Nvidia’s Christmas Eve deal for Groq made for a happy holiday for the AI chip startup’s investors and employees, who were paid out at a very festive $20 billion valuation.

That hasn’t always been the case for license-and-hire deals, where a buyer takes a startup’s technology and most of its staff, and leaves a stub of the company, and some of its employees, behind. Nvidia licensed Groq’s technology and will take 90% of its staff, but nearly everyone involved will get a payout valued at three times the company’s most recent $6.9 billion valuation, according to Axios.

VC investors are talking to their lawyers about ways to protect themselves when they are treated less generously. Samir Bakhru, partner at law firm Orrick, Herrington & Sutcliffe, said investors have recently been proposing updates to the charters of companies they finance to address the risk of these acqui-hire transactions.

“It’s a way to protect investors’ economic interests so that all of the leverage doesn't necessarily sit with the founders or the core technical team in high-profile acqui-hire transactions,” said Bakhru.

There’s growing risk as big tech companies poach key people with eye-popping compensation packages. Most investors have good reasons to be worried after pouring money into the new, research-focused AI startups, which are led by researchers who have left the leading labs.

To avoid poaching, companies need to “include nonsolicitation provisions in your agreements with employees and founders and consider including noncompete provisions in states where they are permitted,” said Bakhru.

Then there is the company left behind after the deal. Investors who continue to hold a stake in the remaining part of Groq, which includes its inference platform GroqCloud, may soon be bailed out. Some potential buyers are interested in bidding for GroqCloud, according to a person with knowledge of the matter. (The Wall Street Journal earlier reported on a possible bidding war on Groq’s remaining assets.)

Others left behind continue to operate or seek to reinvent themselves. Inflection has said it is fashioning itself to help other businesses train and fine-tune their AI models, after Microsoft hired most of its staff and paid for its intellectual property. After Google hired its co-founders and licensed its technology, Character.AI has been looking for potential buyers, though it’s still operating its AI chatbots, according to two people familiar with the matter.

However, Adept AI and Covariant, whose founders and top talent left for Amazon in 2024, have published few business updates to their sites since their deals were announced.

Another group that’s been disadvantaged by the unusual AI dealmaking of the world’s largest companies is bankers, who again find themselves out of the loop. Only two boutique banks managed to get involved in these deals this year: Centerview Partners with Scale AI and Qatalyst Partners with Groq.