Last fall kicked off a series of blockbuster beauty deals: The Estée Lauder Companies and Tom Ford in November ($2.8 billion), L’Oréal and Aesop in April ($2.5 billion) and this week, Kering and Creed, another mammoth sale reportedly valued at close to $3 billion, making it perhaps the largest ever for a single beauty brand.

The addition of a shiny new brand is the logical next step for the conglomerate, which announced the launch of a beauty division, Kering Beauté, led by Estée Lauder-pedigreed executive Raffaella Cornaggia, in February. In buying Creed, Kering Beauté gained industry credibility practically overnight, becoming the owner of a thriving legacy brand in one of beauty’s most dynamic and resilient categories, fragrance (already, US prestige fragrance sales are up 13 percent year-over-year through May, according to market research firm Circana). Creed instantly pads the conglomerate’s nascent beauty arm as it gets the beauty businesses of its owned brands (like Bottega Veneta and Balenciaga) up and running and scouts its next acquisition target.

This sale has intensified the focus on beauty’s bustling M&A space, prompting the question: What will be beauty’s next big deal?

It’s a near certainty that another major acquisition — and numerous smaller deals — are on the horizon. Beauty M&A is back to pre-pandemic levels in terms of volume, said Pauline Mexmain, a senior manager at Kearney and specialist in beauty, personal care and luxury who co-authored a beauty report set to be released in July. There were 203 beauty and personal care M&A deals in 2022, slightly more than 2019′s 195 (though not as high as 2021′s peak of 238), according to Kearney’s research, as well as roughly 800 potential beauty and personal care targets across the globe.

In looking to the categories that may produce the next billion-dollar-plus deal, fragrance and skin care are top of mind, said Mexmain.

Fragrance, in particular, has been ramping up lately, even beyond the Creed deal. Private equity firm Advent International acquired Parfums de Marly, a 15-year-old niche fragrance brand, and Initio Parfums Privés, another perfume line, for reportedly $700 million this week, a staggering amount of money for a line still relatively unknown to anyone who isn’t a beauty enthusiast or avid #FragranceTok user. Additionally, Juliette Has a Gun raised funding from Weinberg Capital Partners, a new investor, and Cathay Capital, in May; Henry Rose, Michelle Pfeiffer’s fragrance line, raised a Series A led by Sandbridge Capital earlier this month; and in March, Estée Lauder’s venture arm invested in Vyrao, a line that purports to marry perfume with energetic healing. Arguably, the sale of Byredo in May 2022 — Puig paid over $1 billion for the brand — was the catalyst for a surplus of fragrance deals that would inevitably follow. Considerably higher than the modest deals that came before it, Byredo set a new standard for M&A in the category. Less than a decade ago, it was reported that Lauder paid approximately $60 million for Le Labo.

It’s skin care, however, that’s commanding the largest portion, making up about 34 percent of deals done in 2023 so far. It’s a big jump from 2020 to 2022, where only about 20 percent involved skin care brands.

Augustinus Bader, rumoured to be a potential M&A target, could be 2023′s next blockbuster acquisition. Since its 2018 launch, the luxury skin care label has not only amassed a cult following but also became a viable competitor to La Mer and other established, decades-old brands. Augustinus Bader has steadily bolstered its offerings the last two years, (though some product launches have felt haphazard, seemingly just introduced in a bid to scale) and last November closed a modest funding round that valued the company at $1 billion.

Estée Lauder probably wouldn’t buy it because it already owns La Mer (it also spent close to $3 billion on Tom Ford in November 2022), and it’s unlikely L’Oréal will do a deal of this size right after Aesop, which cost the conglomerate $2.5 billion. Puig, which bought Charlotte Tilbury and Byredo for over $1 billion each in 2020 and 2022, respectively, could be a viable buyer. Unilever, while a less luxurious potential owner, has deep pockets; despite paying around $2 billion and $500 million for Paula’s Choice and Tatcha in 2021 and 2019, respectively, the company can still use an ultra premium line at the top of its skincare pyramid.

But it’s Kering where Bader could be a great fit, rounding out what will soon comprise a group of designer and niche fragrance, and eventually, makeup by way of Gucci. (The beauty business of the company’s biggest money maker is operated by Coty, through a licensing deal that still has five years left.) But that could get complicated since Antoine Arnault, son of LVMH chairman and chief executive officer Bernard Arnault, and wife Natalia Vodianova, participated in Bader’s last round of funding — which could point to LVMH could be a potential buyer.

While we wait for the next headline-making deal, concurrent trends are brewing in beauty M&A, favouring deals at the low and high ends and investments in proven concepts.

There will likely be fewer deals done in that $100 million to $400 million range, with more pushes towards high ticket items like the Byredos, Aesops and Creeds — and plenty of smaller deals done below $100 million. Year to date, 86 percent of beauty deals have been sub-$100 million and ten percent of deals have exceeded $1 billion, Mexmain said. Since 2019, there have been 11 beauty and personal care deals with reported values over $2 billion, including Tom Ford, Aesop and Waves UK, Coty’s hair and nail business.

“It’s the in-between that is going to shrink,” Mexmain said, noting that although smaller deals “reached a max” this year, some “key large deals” are predicted.

The lightning-in-a-bottle moments that attracted big buyers or sizeable investments have sometimes wound up being less lucrative for buyers and investors. Often, these are lines founded by influencers or celebrities who drum up initial buzz but have trouble maintaining it, whether from lack of focus to problematic behaviour. Take Morphe, which rose to fame for its collaborations with influencers like Hyram Yarbro and Addison Rae. It sold a majority stake to private equity firm General Atlantic for $600 million in 2019, only to file for bankruptcy less than four years later.

Creed, meanwhile, is a proven brand; it’s been around for over 250 years and is the maker of Aventus, one of the most iconic and best-selling men’s fragrances. Beauty conglomerates would rather pay $750 million or even $2 billion for a brand instead of a few hundred million not because they want to spend more money unnecessarily, but they would rather pay more to acquire a proven asset.