Key Takeaways

• E.l.f. Beauty acquires Hailey Bieber’s skincare brand Rhode for up to $1 billion, marking the fastest sale in the beauty industry.
• Rhode generated $212 million in sales within a year as a digital-native brand, appealing to Gen Z consumers.
• The acquisition reflects a renewed interest in celebrity beauty brands, although concerns about long-term performance remain.

E.l.f. Beauty has made headlines with its acquisition of Rhode, a skincare and color brand founded by Hailey Bieber, for up to $1 billion. This deal, which includes $600 million in cash and $200 million in stock, alongside an additional $200 million tied to Rhode’s growth over the next three years, reflects a significant bet on the popularity of socially-driven beauty brands.

In just three years, Rhode has generated $212 million in sales, primarily through direct-to-consumer channels, offering a range of ten products priced under $38. This acquisition gives Rhode the distinction of being the youngest beauty brand to reach such a valuation, with revenue multiples of 4.7x, declining to 3.7x based on the overall purchase price. Despite a settlement reached with investment banks to explore a sales process, this outcome was unexpected for many in the industry, particularly following challenges in acquiring other notable brands like Rare Beauty.

Industry experts are optimistic that E.l.f.’s acquisition of Rhode signifies a shift in the beauty merger and acquisition landscape, with a growing appetite for celebrity-owned, digitally focused brands. E.l.f.’s CEO, Tarang Amin, expressed surprise at Rhode’s rapid sales success, stirring expectations for the launch of their products at Sephora in the fall. E.l.f.’s past acquisition of Naturium, a skincare brand expected to reach $90 million in sales, further highlights the company’s interest in high-growth potential brands.

Rhode, which has cultivated a strong online presence with 1.5 million TikTok followers and significant engagement through celebrity endorsements from Hailey Bieber, is positioned to leverage this digital traction for continued growth. Brand tracking data shows an increase in awareness, particularly among younger demographics, suggesting a healthy market demand. However, some analysts caution against the risks associated with celebrity-driven brands, noting the potential for volatility based on the shifting focus of consumer trends.

Despite E.l.f.’s hopeful outlook, experts highlight the importance of maintaining distinct brand identities post-acquisition while emphasizing the risks of aligning Rhode too closely with E.l.f.’s mainly mass-market image. Concerns also linger regarding the celebrity brand’s longevity, particularly given comparable cases like Kylie Cosmetics, which lost momentum after initial hype died down.

The market reacted positively to the acquisition news, with E.l.f.’s stock rising 2.2% in after-hours trading. This comes amid a backdrop of slumping sales and fierce competition in the beauty sector, with E.l.f. recently reporting a 28% increase in net sales for fiscal year 2025. As Rhode prepares for its Sephora launch and furthers its distribution ambitions, the beauty community remains cautiously optimistic about the brand’s trajectory.

Amidst challenges such as market saturation and changing consumer preferences, this acquisition is viewed as a pivotal move for E.l.f. It positions the company within the prestige segment, expected to be resilient even in economic downturns. As Rhode seeks to thrive independent of its founder’s influence, the next 12 months will be critical in determining whether this ambitious acquisition pays off.

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