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It’s not that a major M&A-fuelled shakeout is imminent in today’s highly fragmented beauty industry — market conditions may make that a moot point. But given beauty’s expected growth trajectory, plenty of deal-makers are eager to pile into the sector. That doesn’t worry Tricia Glynn, a managing partner and member of the consumer retail leadership team at Advent International, which today holds more than $90 billion of assets under management. According to Glynn, who joined the firm in 2016, there are plenty of opportunities for private equity investors like Advent as entrepreneurs look for external partners to help grow their businesses.

In many respects, Glynn has had an exceptional seat at beauty’s deal-making table, having seen over the finish line two industry deals for the global private equity giant — to buy a majority stake in hair care company Olaplex in 2020 before floating it on Nasdaq the following year and the carve-out of three makeup brands from Shiseido Americas to form Orveon in 2021. Advent continues to be involved in both companies — according to public documents, the firm holds combined voting power in Olaplex of approximately 80 percent, while Orveon remains one of its portfolio companies with Glynn holding a board position.

For Glynn, building such long-term investment relationships begins with two must-haves: a great product and a clear understanding of the business or consumer problem that an investor can help unlock.

BoF: How does the focus on beauty deals fit into Advent’s overall investing philosophy?

Tricia Glynn: From an Advent perspective, we love this market. We’re looking for similar things in beauty that we look for in other sectors of consumers. In each sector, we’re trying to find brands that can build and grow for decades. Then our job is to unlock those brands and opportunities with capital, with global insights, with supporting the executive team to build a phenomenal culture.

To invest in the consumer field at scale, we are big believers that you can’t be a contrarian. You need to be investing where the consumer is going over the next 10 to 20 years.

We think beauty is a beautiful fit inside that strategy. It’s not just colour cosmetics; it’s not just colour cosmetics and skin care. Now you have colour and skin and hair and wellness — beauty inside and outside. It’s all still valid.

There are so many different ways to grow. Also each of these markets I’m listing are very big, so you can have more than one brand [in a portfolio] and they don’t necessarily directly compete.

There are different ways to come at the beauty sector. … Olaplex, Orveon are quite different, but they show a truism of the Advent strategy: understanding the business problem or the consumer problem that’s being unlocked.

Beauty and wellness is an industry that allows the consumer to invest back into themselves. There’s a lot of good tailwind in it. The definition of who is willing to invest back in themselves has evolved and broadened over time [and so have] the tools which we’re giving people to invest back in themselves.

BoF: Other investors — financial alongside strategic — would agree with you about beauty’s opportunities, and probably explains why beauty brands have been attracting so much interest from potential buyers and investors, especially after the pandemic when access to capital was cheap and easy. What’s your take? What’s different from an acquirer’s perspective these days?

TG: Yes, more capital, more business generation generally speaking — that’s a great thing. That doesn’t bother me at all.

For a long time, there was a view that it was very, very hard to compete with the likes of the Estée Lauder’s and L’Oréal’s of the world. … There was the general belief, and this exists in other sectors of the economy, that the big “strategics” had the right of way. Look, they’re incredible companies. They do have really talented executives and professionals out building [companies], as does P&G, as does Unilever.

But what you’ve seen proof of in the last three years, five years is that you can have investment strategies that are not just tied to those big conglomerates that are effective. So more buyers are coming in.

What you haven’t seen yet is a rash of exits for those buyers, and ultimately you’ll need to see that. Nothing is holding back exits but time. More capital has chased into the sector and all that capital will and should see exits over time, both to private owners as well as to respected consolidators in the world of beauty.

Ultimately, this category is big enough that you can invest in innovation, you can invest in the sustainability of packaging, you can invest in clean product formulas that really work. You can be efficacy-based. You have got almost all the attributes that we’d see in any consumer market that you can put to work in beauty.

More capital has chased into the sector and all that capital will and should see exits over time.

BoF: In such a big and crowded market, how do you identify targets?

TG: If I distil everything I’m saying down it is this: I’m looking for businesses where they want to inflect the line of what they’re doing over the next five years. For whatever reason, they need to get outside of their conglomerate, they need more capital, the founder doesn’t want to take the next step.

I’m not particularly interested in a business that was started just to be sold. I want to buy businesses where [the founders] wanted to run it their whole lives but there’s [now] some reason that this next phase [of the company’s growth] is better done with a minority or majority partner.

When we go about putting investments behind [those companies], we’re really flexible. It can be minority capital or majority, it can be a carve-out — as in the case of Orveon; or backing a business by buying from the founder — like in Olaplex.

BoF: Speaking of those two deals — Olaplex and Orveon — how do they reflect the role investors like Advent can play in helping brands scale?

TG: If you look at Olaplex, the product is one of the most unique opportunities I’ve ever seen. The product actually fixes damaged hair, rebuilds the bonds in damaged hair. When we did the original diligence work, I was blown away by the efficacy and the strength of the community. [But] there was not a lot of infrastructure that had been built underneath the brand. Supply chain rigour, procurement, talent in HR, professionals inside the firm to help it grow, a finance organisation, a marketing organisation — a long list, right?

When we completed the carve-out of the Orveon brands from Shiseido, there were three brands with incredible products and customer loyalty, [again] without the infrastructure.

One thing neither Olaplex nor Orveon has is legacy systems, or legacy processes. The marketing was built for today. The supply chain was built for today. Both companies are highly focused on innovation around product, which I think has got to be the core of any consumer-orientated company and innovation on how to speak to the customer.

I don’t want to conflate these two brands too much; we happen to be a common owner of both and we own other businesses. There are similarities, but also differences — the channel strategies are slightly different, the marketing strategies they need to employ are different.

BoF: With Orveon, you kept three brands under one umbrella. Why not simply keep them separate?

TG: We thought about that a lot. The benefit — and you see this a lot in the start-up world actually — is that you can have incredible talent around a start-up, but at some point, the appeal and size of that business only allow you to bring in so much new talent to help you grow. The heft and size we have of Laura Mercier, BareMinerals and Buxom allow the company to afford a really talented executive team that can do more. They have run bigger businesses.

The reason people joined Orveon with us — besides following the leadership of Orveon CEO, Pascal Houdayer, or besides a love for these brands — is the ability to chart a new path in the industry. I’m not a car person, but you get a brand new chassis to go plug new brands into and that can be pretty compelling.

BoF: Was the idea to eventually be able to compete along the lines of Estée Lauder Companies or L’Oréal? Was there a discussion about that future M&A-driven growth when you were putting together that deal?

TG: I do think that business will continue to do M&A and bring in new brands. If we were to get all the way to the size of an Estée Lauder or L’Oréal, that would be great; that’s not bad for anybody. They’re incredible companies — [but] with 100-year track records behind them. I think the goal can be much more modest than that, and still be a beautiful opportunity for this business.

BoF: As you said, Olaplex has taken a different route. Its IPO makes it a bit of an outlier since there have been so few beauty IPOs. What are the pros and cons for companies like them to go public these days, or are there more realistic options for brands?

TG: There are a lot of options for brands, but I don’t shy away from the public markets. I’m still a believer in beauty IPOs despite 2022 and what we’re all living through right now. Public markets have flaws, but they’re good for a lot of things. … One of the benefits of being public is that all the shareholders can benefit from the business for the very long term. You get a fairly liquid way to compensate employees with equity over the long term.

Ultimately, we felt that Olaplex could own its own destiny for longer as a public company.

BoF: Looking at the deal landscape, what are you seeing?

TG: Debt markets are volatile, public market valuations are still down dramatically; inflation is still persistent and there are concerns about liquidity now in a way that wasn’t the case [earlier in the year].

You end up with two outcomes: one, less deal flow than you had before because people don’t want to sell at low prices, and two: in these times of volatility, trust really matters.

For our business, we don’t need to invest every minute of every day; we are with this for the long term. I think spending real time with executives and owners and building that trust is really critical. You absolutely can still invest in these moments of time, but perhaps you do structure it differently. Perhaps there’s no debt and just a liquidity facility.

We’re spending time thinking about what the business really needs to be investing in right now, without worrying about 10 years from now. In other situations with plenty of liquidity, you might be able to still invest for the 10-year-away big opportunity that changes the market.

As you look across all of that, ultimately great businesses should gain share in tough times and will persist to get to the other side of all this.

This interview has been edited and condensed.

This article first appeared in The State of Fashion: Beauty report, co-published by BoF and McKinsey & Company.

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