Advent International led the purchase of Olaplex Holdings Inc. in January 2020 and in little more than two years, the firm has pulled out nearly triple its initial investment and is sitting on a stake worth around $9 billion — if it can hold on to those gains.

Despite a 38 percent plunge in Olaplex’s stock this year, the return is still more than 10 times the value of the original deal and places it among the most lucrative private-equity transactions in the US, according to Pitchbook data. By comparison, Blackstone Inc.’s acquisition of hotel chain Hilton Worldwide Holdings Inc. made $14 billion, tripling its investment over a span of 11 years.

The Olaplex deal stands out not only for the stunning returns but also for being almost entirely engineered by women — a rarity in the male-dominated buyout business.

The pandemic also played a key role in the surprising growth of a company founded in a California garage less than eight years ago, but the recent share drop highlights the risks of investments focused on fickle consumers.

To unwind the deal, Bloomberg reviewed public filings and spoke to some key players involved in the deal, including Olaplex chief executive officer JuE Wong, who joined while Advent was finalising the deal, and investor Emily White, an early enthusiast. Advent declined to comment.

The story starts in 2014 in a garage in Santa Barbara. Alongside lawn chairs and surf boards, co-founder Dean Christal whose family was in the hair-care business — developed a compound to help repair bonds in hair with the aid of two University of California chemists. The substance became the patented core of Olaplex, which was founded in July that year by Dean and his wife Darcy Christal.

The next year, the company got a jolt of recognition when Kardashian said she used Olaplex. It was part of the company’s early success in reaching out to celebrity influencers and cultivating a fan base through social media. That helped during the pandemic, when people in lockdown were looking for ways to make them feel good.

After its launch, the company was gaining a following with direct sales to salons. White — Snapchat’s former chief operating officer — had her first brush with Olaplex after getting a treatment by her stylist. It worked “like magic,” said White, who’s been president of Anthos Capital since 2018 and has been an Olaplex board member since August 2021 — one of nine women on the 11-member board.

But the company was outmatched in an industry dominated by global giants like L’Oréal SA and Procter & Gamble Co., and the Christals were looking to sell. White pitched Olaplex to Anthos more than four years ago, but the investment firm passed because owning companies outright wasn’t part of its strategy.

Olaplex stayed on the market, and in the summer of 2019, Advent managing director Tricia Glynn approached White about a deal. The two had gotten to know each other when they both served on the board of Lululemon Athletica Inc., another Advent deal.

The investment firm had been approached by bankers hired by the shampoo company’s founders earlier in 2019. Advent initially passed before reaching out to the owners again months later.

By November 2019, the framework of a deal — put together by Glynn and senior Advent partner David Mussafer — was in place. The next issue was finding someone to manage the business. That’s where Wong came in.

At the time, Olaplex only employed around 30 people, and Advent set about constructing a new team. Wong was a good fit, boasting a track record running companies for private-equity backers, including a stint at cosmetics maker Elizabeth Arden Inc. She joined around the time the deal closed in January 2020.

The investment thesis was simple, according to Wong. Consumers had embraced expensive skin-care products and were starting to do the same with hair. Olaplex isn’t cheap: a hair-maintenance kit costs $16 and a complete repair set goes for $196.

By buying Olaplex, Advent was taking a slice of the fast-growing luxury hair-care market, which was valued at around $20 billion in 2019 and expected to grow at a compound annual growth rate of 5.9 percent through 2027, according to Grand View Research.

While the coronavirus pandemic — which emerged as a global threat just weeks after the deal closed — offered a serious challenge by shutting down hair salons, Olaplex shifted sales directly to consumers, an effort helped by its social-media presence.

During this time, Wong pushed for an expansion on TikTok. Olaplex-tagged posts on the video-sharing service have generated more than 650 million views, helping the brand to first place in a 2021 report by shopping site Cosmetify.

“With the lockdown people were spending so much time on your phone or screen,” Wong said. “For a lot of companies it was no longer who can outspend each other, it was really which company could engage, connect and convert with customers online.”

The outreach fuelled a 90 percent surge in sales to $282 million in 2020 and paved the way for the company’s initial public offering in September 2021. That allowed Advent to sell some shares and extract a dividend in transactions that totaled $2.15 billion, compared with an initial equity investment of $800 million.

The firm currently owns a 77 percent stake and will need to carefully plot any exit strategy. Already doubts have risen, and Olaplex is now trading below its offer price.

Maintaining its momentum will indeed be a challenge as the pandemic eases and beauty routines shift again. Wong acknowledged that the “explosive growth” of the past two years had caught her and the company by surprise.

By Will Louch

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