Why was Hailey Bieber's Rhode acquired by Elf Beauty? Finance expert reveals reasons
Hailey Bieber's makeup and skincare brand, Rhode, is being sold to Elf Beauty for about $1 billion. On Wednesday, May 28, Elf said it would pay Rhode shareholders $800 million in a combination of cash and stock, along with an additional potential earnout consideration of $200 million – but it will be subject to some performance-related conditions.
Sky Canaves, eMarketer analyst, said of the recent development, according to the New York Post, 'The Rhode deal is a bold move for e.l.f. into premium beauty at a time when the prestige side of the industry has lost some of its momentum as a result of consumers buying less or trading down.'
Mahalakshmi C, a finance expert, has taken to Instagram to reveal what she believes are the reasons why Elf Beauty acquired Rhode. Her post is captioned, 'Celebrity brand acquisitions are usually structured this way: the celebrity continues to be a part of the company for a few years. We all know the celebrities and their personal brands play a huge role in growing these businesses. Ideally, the acquiring company will figure out a strategy to grow the brand independent of the celebrity over the next few years. In the meantime, the company is incentivised to keep performing well with a future payment - this is known as an earn-out. For Rhode, the acquisition was for $1bn, but $200mn will only be earned if the company hits certain targets over the next 3 years.'
A post shared by Mahalakshmi C (@ca_maha_)
Mahalakshmi's Instagram bio says 'MBA Dartmouth @tuckschool' and 'Ex- Venture Capital (yes, it was kinda like Shark Tank)'.
Mahalakshmi listed the reasons, which are as follows:
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