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Now that The Estée Lauder Companies’ merger-that-wasn’t with Puig is in the rearview, America’s largest family-controlled beauty company can focus on completing C.E.O. Stéphane de La Faverie’s long-gestating corporate turnaround. Beyond an additional 3,000 or so layoffs that have to be approved by the end of Lauder’s fiscal year (bringing total reductions to 10,000), some major changes to distribution, and wins in select categories (namely fragrance), the market is eagerly waiting for the business to start offloading a handful of underachieving brands so it can once again meaningfully participate in M&A.

Indeed, any movement on that front has been top of mind for investors and analysts—some of whom have directly communicated their thoughts to de La Faverie. “What they want, and what they’ve been telling Stéphane, is, ‘Quit messing around, execute your turnaround plan. You were doing really well, we were encouraged with the process. Get the divestitures done,’” said a person with knowledge of Lauder’s business. “The bottom line is ELC is moving forward,” said someone involved with the company. “No one is sitting around thinking why this deal didn’t work out.” (ELC declined to comment for this story.)

It’s not as if de La Faverie needs to be reminded. Back in January, BoF reported that Lauder was trying to divest several of its more sluggish properties in a package deal that could be valued “in the low nine figures.” None of the brands has been sold yet, but the labels on the block are Too Faced, Smashbox, and Dr. Jart—all of which are in varying states of disarray, although some worse than others. Smashbox is probably too far gone to appeal to anyone, and the jury is still out on Dr. Jart. But Too Faced—which is profitable, and does several hundred million in revenue a year––is a potentially exciting M&A target.

That seems to have been the industry consensus, too. “No one bid on the package deal,” said a person close to the process, adding that the offering has since evolved into a veritable two-for-one, with Too Faced as the real prize and Smashbox as an add-on. (For what it’s worth, Smashbox wouldn’t be entirely dead weight; whoever buys these businesses could integrate some of Smashbox’s existing formulas into Too Faced.) Several companies that specialize in distressed assets were also eyeing the Too Faced/Smashbox combo, while some smaller private equity funds have looked at Dr. Jart, according to the person close to the process. These days, the latter is estimated to be a $130 million–$140 million business, a fraction of the $500 million-plus in net sales Dr. Jart was expected to reach in 2019.

A MESSAGE FROM OUR SPONSOR

Agentic commerce isn’t a future concept. It’s already reshaping how people shop. Static storefronts are giving way to guided,

conversational experiences that don’t just surface products. They drive decisions and conversion in real time. Swap’s Agentic Commerce 101 breaks down what’s real and what it means for brands right now. Inside:

• What agentic commerce is and why most AI tools don’t qualify

• Why AI discovery platforms aren’t built to convert for your brand

• Why owning your AI experience and your data is becoming non-negotiable

👉 Download the full report

According to WWD, the final bids for Too Faced (and Smashbox) were due in mid-May, but nothing has materialized yet. I chatted with several people close to the process, including someone familiar with the deck, who said that nearly all the firms that looked at Too Faced have dropped out of the running. Another person familiar with the process said “there has been interest, but nothing formal has been signed yet.” Last year, I’m told, gross revenue dropped to $360 million, from $400 million in 2024. Of course, that’s still a huge business, but it’s hard to convince any savvy investor to catch a falling knife in an increasingly crowded space.

This person added that Too Faced “has been in long-term decline,” and posited that it could only be “reinvigorated” by a private equity company, not a strategic—an almost certainly true and acute observation. A P.E. firm, after all, would view the declining revenue as an opportunity to rightsize the business with brute Excel force. “The typical firms that look at distressed assets were going to offer the bare minimum for Too Faced. They were looking at it for 1x revenue, but felt Lauder wouldn’t take it, given that it’s profitable and big,” they said, estimating that, all in, a sale could perhaps fetch $500 million.

Obviously, this would represent a major loss on the original investment. Lauder paid $1.45 billion for the brand—its largest acquisition to date at the time—back in 2016, when it was projected to surpass $270 million in net sales. Still, ELC would likely jump on the right offer, given the enormous financial strain the company has endured over the past few years. Meanwhile, even if a buyer were to offer that 1x revenue multiple for Too Faced, Lauder would still have sufficient capital to acquire an attractive, fast-growing asset to satiate investors and the market—perhaps in the prestige fragrance category, as de La Faverie intimated at the Deutsche Bank consumer conference in Paris on Tuesday.

Meanwhile, Lauder’s overlords in the GM Building have been dealing with a simultaneous challenge: conflicting messaging regarding the collapse of the Puig deal. As you know, the initial reports in late May cited the change-in-control clause in Puig’s contract with Charlotte Tilbury as the reason the potential merger fell apart—a $1 billion excuse just plausible enough to make it seem that ELC walked away from Puig. But as I noted in my dispatch last Wednesday, she certainly was not the only reason: Acquisition costs, the leadership structure, and complicated family dynamics all contributed to the failed process.

As the Lauder-friendly narrative about Tilbury publicly started to unravel, industry trade Beauty Matter published a bombshell report by former Wall Street Journal writer Sabela Ojea late Thursday that basically reflected Puig’s version of events and included a host of juicy new details. (Ojea co-wrote the original Lauder succession story that started it all. It’s a must-read.)

Unfortunately, you can no longer read the piece. Beauty Matter had taken it down by Friday afternoon, and replaced it on Sunday with an updated, pro-Lauder version purporting to offer the “true” reason the deal fell apart—new byline and all. “As you know, this is a fast-moving and developing story,” Kelly Kovack, the editor-in-chief of Beauty Matter, told me. “After the Puig shareholder call, we realized additional research was required and spoke with more sources. In the end, we decided to replace the story to ensure the accuracy of the information being reported.”

Originally, Ojea reported that at Puig’s annual meeting, the company provided more insight into what went wrong—basically, the themes I mentioned, plus a few other tensions, which ultimately led both parties to walk away. The piece also noted the astronomical fees that ELC spent on diligence, how certain top Lauder executives were not involved in deal talks, and that the process had devolved into a power struggle that was “no longer a merger of equals.”

The replacement story included none of those details. In addition to blaming Puig for media leaks, it reiterated the Tilbury narrative, quoting a person who was “closely involved in the negotiations” saying that the makeup founder was “100% ... a deciding factor in why this deal fell apart. I think there’s a narrative that Charlotte Tilbury was a convenient excuse for Estée Lauder to walk away; that is inaccurate.”

Multiple sources with knowledge of Lauder’s business told me that ELC was incensed that Ojea’s piece included details about who was, and who was not, privy to negotiation details while naming certain executives. I also heard there was a discrepancy in how much ELC spent on diligence and the dollar amount reported by Ojea, although issuing a correction or comment from Lauder probably would have sufficed.

The irony of all this expended effort is that, in the end, de La Faverie wound up confirming that the deal collapsed because of price at the Deutsche Bank conference. “If we cannot reach the growth and the profitability at the right price point, then that is not an option,” de La Faverie said. “And this is why, obviously, ⁠this deal didn’t go through, because it was not at the right price.” Well, there you have it!

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The ANDAM finalists have been announced and include Marie Adam-Leenaerdt and Zomer. [Style Not Com]

Until tomorrow,
Lauren

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