Who could buy a rare beauty?

Bloomberg's report that Selena Gomez's Rare Beauty was exploring a sale sent industry executives, financial backers and strategic buyers into a tizzy as many insiders tried to understand how the news might affect them.

Earlier this week, I reported that the brand founded in 2020 had surpassed $400 million in net sales in the 12 months ending in February, prompting two investment banks, Goldman Sachs and Raymond James, to explore their options. According to my sources, everything is being considered, from selling to a cosmetics conglomerate or investment firm, to pursuing an IPO or doing absolutely nothing. Notably, Goldman has recently made a number of multi-billion dollar beauty deals, including Tom Ford, and Raymond James had the best hit rate in 2023, selling Mielle Organics, Naturium, Dr. Dennis Gross and K18; the last two occurred on the same day.

Rare has plenty of time to choose a path (for restless beauty connoisseurs, we'll probably be looking at 2025 at the earliest), but in the meantime, let's consider who might actually make a bid for the hotter-than-hot brand. Given Rare Beauty's revenues and profits (adjusted earnings before interest, taxes, depreciation and amortization are at least 35 percent of net sales), it would take a buyer with deep pockets to purchase the brand. The $2 billion price tag – my initial estimate, given potential M&A targets earlier this year – may be on the low side.

Blackstone comes to mind as a potential contender. He reportedly competed in the K18 competition last year and was paid to Supergoop in 2021. Next up is BlackRock, which just sold Creed to Kering, although it tends to hold on to properties longer. Both are positioned to further scale the business for the right strategic buyer.

If Rare Beauty is looking at the beauty conglomerate pool, the choices are more limited. Shiseido wants to prove it is the best skin care company in the world by purchasing Dr. Dennis Gross. Rare has just switched to body care, but it's a heavy makeup line, so it's clearly not a good fit. Coty has already made a celebrity bet with Kim Kardashian and Kylie Jenner, which seems to be coming to an end; is also focusing on other areas, namely improving its luxury offering. Meanwhile, Estée Lauder Companies is struggling with financial problems.

That leaves L'Oréal and Unilever. Both have shown they're willing to spend big on the right brand, with the former paying $2.5 billion for Aesop last year and the latter around $2 billion for Paula's Choice in 2021 (and there won't be a waste of cash after spinning off its division ice cream). Gomez's Rare Beauty would help Unilever gain a foothold in the prestigious makeup segment, which is less developed than other categories (Hourglass is the only such offering).

Still, I'm not sure L'Oréal will let this go. It would do him good to stir up Millennial and Gen Z customers in the Luxe section, which consists of designer brands Lancôme, Urban Decay and Youth to the People. And remember, Rare CEO Scott Friedman was CEO of NYX when the line was sold to the French cosmetics company in 2014.

Rare will consider its next move, but the longer it waits, the more valuable and expensive the brand becomes.

Here are my top picks from our beauty and wellness insights and analysis this week:

1. Why Sisley is launching its first new brand now

The Neuraé line is inspired by neuroscience research and will be sold at a lower price point than Sisley's entry-level luxury offering. This is the first such family company to introduce a new brand to the market.

2. Butt Cream, Bikini Photos and Body Spray: What's Behind the Sol de Janeiro Hype

From body cream to fragrance, L'Occitane's crown jewel has lured TikTokers, teenagers and shareholders alike. Now, at the height of its popularity, the latter believes the vibrant beauty brand deserves its own public listing.

3. The center invests in Claudia Sulewska's Cyklar brand

The company behind the recent sale of Naturium is adding a personal care brand to its portfolio.

BEAUTY NEWS BUSINESS IN BRIEF

CVC-backed perfume retailer Douglas raised $967 million in an initial public offering, but it went bust on its debut. The CVC Capital Partners-backed company sold about 32.7 million new shares and raised about 850 million euros, while existing shareholders sold about 1.5 million existing shares. The company's shares hit a low of €23.20 per share compared to its IPO price of €26.

Sephora withdraws from Korea. The company said it would phase out all of its operations, including its app, online store and physical stores. Launched in 2019, it now has five stores in Korea, after closing two stores in the past two years, according to local press.

TikTok influencer Dr. Muneeb Shah is launching a skincare brand. The Remedy line is based on the most important skin care concerns of Generation Z and Millennials. Remedy's advantage is its emphasis on the “skinimalism” trend, replacing multi-step procedures.