Business in beauty: Exploring deal activity in the beauty sector

How Market Trends Are Shaping Beauty M&A                 

The beauty sector continues to defy economic headwinds. Despite ongoing pressure on consumer spending, the category keeps adapting – delivering both everyday essentials and aspirational treats that shoppers still want to invest in.

But resilience doesn’t mean plain sailing. This is an intensely competitive market where trends shift rapidly and consumer preferences can take unexpected turns. For both established brands and emerging players, understanding where the market is heading is essential.

With Christmas approaching – a make-or-break period for many businesses – it’s particularly important to look at how these market dynamics are shaping M&A activity.

Top trends

Fragrance continues to dominate as the sector’s strongest growth category. The rise of niche and artisanal scents shows no sign of slowing, with the global luxury niche perfume market projected to grow from £1.31bn in 2025 to £2.24bn by 2033*.  Underpinning this, layering and personalisation are becoming more common practice, creating opportunities for brands that can offer distinctive propositions in a crowded market.

Skincare also remains robust, particularly in categories like K-beauty, where brands such as Anua, Beauty of Joseon and Yepoda continue to gain traction among consumers seeking collagen patches, innovative sunscreens and ingredients like snail mucin. The sector is also seeing growth in technical body care, with brands like This Works and Susanne Kaufmann launching vitamin-enriched and enzyme-based products.

While luxury accessories have struggled – with consumers pulling back on big-ticket items like handbags and shoes – smaller beauty indulgences have held strong. A few pounds added to the price of a favourite skincare product is far easier to absorb than a £500 handbag. And fragrance and skincare remain go-to choices for Christmas gifting, which matters as we head into the crucial festive trading period.

There are tentative signs of improvement too. With inflation beginning to stabilise, consumers may have slightly more breathing room this year – which could translate into stronger sales across the sector.

The omnichannel imperative

Amid this context, one of the most significant shifts we’re observing is the blurring of lines between digital-native brands and traditional retail.

Much ink has been spilled chronicling how consumers spending is moving online. However, more and more direct-to-consumer businesses like Glossier and Ffern – which built their reputations online – are opening pop-ups and permanent retail spaces. This reflects a broader recognition that, while e-commerce is essential, a significant portion of beauty sales still happen in physical stores.

We’re also seeing brands invest heavily in experiential retail. Stores are becoming destinations in their own right, offering workshops, personalised consultations and immersive brand experiences designed to create emotional connections with customers and drive long-term loyalty.

For investors, this omnichannel capability is becoming increasingly non-negotiable. Brands need to offer seamless experiences across touchpoints – from social media discovery to in-store trial to online purchase and delivery. Those that can demonstrate this integrated approach are better positioned to attract backing.

For consolidators and private equity backers, supporting portfolio businesses to develop these capabilities – whether through capital investment in retail infrastructure or by integrating digital platforms – represents a clear value creation opportunity. However, it also requires careful planning and a willingness to adapt traditional retail models.

From trends to transactions

This combination of resilience, innovation and evolving consumer behaviour is creating a dynamic M&A landscape. For investors – particularly private equity firms – the appeal is clear: brands that can demonstrate recurring revenues and strong customer loyalty represent an exciting growth prospect.

We’re also seeing consolidation across the market as larger players look to build scale and broaden their portfolios. Heritage brands with strong equity remain attractive, but acquirers are equally focused on emerging businesses that can capitalise on new trends – whether that’s functional fragrances, K-beauty innovations or technical body care.

The key for any business looking to attract investment is demonstrating not just current performance but future potential. That means having a clear growth strategy, robust management capability and an understanding of how your proposition fits within evolving consumer preferences.

Navigating challenges and seizing opportunities

The sector isn’t without its challenges. Rising costs, competition for consumer spending and an intensely crowded market mean that not all businesses will thrive. We saw this in September when Bodycare entered administration, citing these very pressures.

For companies considering their options, preparation is everything. That means having a clear understanding of your market position and being able to articulate what sets you apart in a competitive landscape.

At FRP Corporate Finance, we work with businesses at different points in their growth journey. Whether you’re an emerging brand looking to scale or an established player exploring acquisition opportunities, we bring deep sector expertise and a practical approach to helping you achieve your goals.

The beauty sector offers genuine opportunity for those who can navigate it successfully. Consumer demand remains resilient despite economic pressures, and investors continue to actively back quality businesses with strong fundamentals. For those who are prepared, the outlook remains positive.

Source: Retail Gazette