e.l.f. Beauty Snatches Up Fem-Founded Rhode, Moving Into The High-End Market And DTC Sales
Following a 2024 downturn for the beauty market’s mergers and acquisitions, e.l.f. Beauty LLC agreed to purchase Rhode in the largest beauty acquisition of this year. Closing on May 28th, 2025, at a potential total valuation of $1 billion, Vogue described the acquisition as “one of the most high-profile beauty deals in recent years.”Estimated at a total market cap of approximately $62.97 billion, the beauty market is booming. It is even expected to grow at a CAGR of 6.1% until 2030 (Grand View Research 2024). With skincare representing up 42.8% of the total beauty market, Rhode and co-founder Hailey Bieber have made a bold entrance into the industry.
Founded in 2022 by Hailey Bieber and fellow co-founders Lauren Ratner and Michael Ratner, Rhode is actively expanding the frontier of influencer-centered marketing. Despite having zero retail presence and offering only 10 SKUs, Rhode generated $212 million in direct-to-consumer sales in the twelve months ending March 31, 2025, driven by its strong social media presence (Business Wire 2025). Bieber’s influence and creative guidance for Rhode have created a cult following, particularly among Gen-Z and millennial consumers. Leading with minimalistic, “clean-girl” campaigns, Rhode has created 366% year-over-year earned media value growth from 2022 to 2023, reaching a total of $248 million (e.l.f. 2025). Tarang P. Amin, CEO of e.l.f., described Rhode’s vision most effectively: “[Bieber and the Rhode team] disrupted beauty” (e.l.f. 2025). By creating a world beyond their luxury products through PR trips, viral phone cases, and pop-ups, Rhode capitalizes well on the branding potential of social media. In 2024, Rhode brought the “Rhode Summer Club” to life in Mallorca, Spain, for a group of influencers. Rather than a typical PR trip where the buzz revolves around partying and loud, active events, Rhode leaned into their expertise and brought their clean, cool campaign to life. Instead of forcing the PR trip to be loud, they simply gave their invitees an experience aligned with the brand to generate the best possible content for Rhode. For two weeks in Mallorca, they were brought to the “Rhode Summer Club”, a pop-up takeover of Beach Club Gran Folies, and all guests were given exclusive Rhode sun loungers, towels, ice cream treats, beach inflatables, and more (Rhode 2025). Mallorca displayed a world beyond their products and exemplifies one of many successful social media campaigns that catapulted their success.
Rhode’s rapid rise through viral, minimalistic campaigns ultimately drew the attention of e.l.f Beauty, highlighting how effective social media campaigns can translate into real market value. Before acquiring Rhode, e.l.f. Beauty, which had a market capitalization of $7.34 billion at the time the deal closed, was already thriving by appealing to price-sensitive consumers through its wide distribution network and strong brand recognition. Over the past five years, e.l.f. 's stock price increased by 538% and is currently in a high-growth stage compared to more mature competitors such as L’Oréal, whose stock has only risen 35.54% in the last 5 years. Known for the accessibility and affordability of its e.l.f Cosmetics and e.l.f. SKIN lines, the brand appeals primarily to a younger demographic while also capturing a broad base of price-sensitive consumers across age groups. As a multi-brand company, e.l.f. Beauty recently made acquisitions to venture into the luxury cosmetics space. For example, e.l.f. Beauty’s first foray into the high-end market was in 2020 when they acquired W3LL People and launched Keys Soulcare. With its acquisition of Naturium in 2023 for $355 million, e.l.f. Further advanced its campaign to compete in the luxury sector. However, the Rhode acquisition represents its most aggressive move yet into premium cosmetics.
e.l.f. funded the deal with $600 million in fully committed debt financing, $200 million of stock (~2.6 million shares), and a $200 million earnout over the next three years based on performance. This constitutes a total purchase price of $800 million that could potentially reach $1 billion if Rhode achieves all its milestones. The purchase price represented a multiple of 3.8x LTM sales, and the entire management team of Rhode is staying on board. Additionally, Hailey Bieber is now Chief Creative Officer and Head of Innovation at the joint company and plans to continue leading the vision of the brand. Notably, J.P. Morgan Securities LLC and Moelis & Company LLC served as financial advisors to Rhode on the deal.
Fore.l.f., the strategic benefits of this deal are compounded by operational and marketing synergies. Rhode offers e.l.f. a stronger presence in the high-end market, a platform for DTC sales, and a modern and powerful social media presence. e.l.f. Beauty can leverage its strong retail presence to expand Rhode’s reach and offer multiple sales channels to attract new customers. In early September, just a few months after the acquisition, Sephora began to carry rhode products on its shelves. 70% of Rhode’s social media following is international, but international customers represent just 20% of their sales (Andreeva 2025). With such pent-up demand and lack of supply outside of the US, e.l.f. Beauty can leverage its extensive resources and international presence to expand Rhode’s distribution footprint. Before the Rhode acquisition, e.l.f. Beauty was projected to more than double their sales over time to over $3 billion. With the Rhode acquisition, e.l.f. is gaining a cultishly loyal consumer base and a young, rapidly growing company with lots of potential. According to Piper Sandler’s study, by expanding its current catalog of 12 SKUs to 35 SKUs, Rhode can generate $104.9 million in annual sales from Sephora alone.
Despite taking on $600 million in debt plus the cost of making further investments to expand their logistic and marketing infrastructure, Rhode is still expected to be accretive to e.l.f. 's EBITDA margin. As of the end of e.l.f. Beauty’s latest fiscal year, e.l.f.’s net debt to EBITDA multiple is around 2.14x while Ulta Beauty’s is approximately 1.81x. Though this multiple sits higher compared to its peers, e.l.f. has a debt to shareholders' equity ratio of 0.64, which is low relative to comparable entities like Ulta Beauty, whose ratio sits at 1.4. Additionally, they operate at a very high gross margin compared to Ulta: 69% versus 39.2%. This indicates that, between the company’s balance sheet and e.l.f. Beauty’s rapid growth, the company is in a position to commit to $600 million in new debt.
The combination of the two companies is already delivering results, evidenced by Rhode products’ immediate success in Sephora, reportedly amassing $15 million in first-day sales (Yahoo Finance 2025). Moving forward, if Rhode continues at its current pace, there is a high chance the company will receive the full $200 million earnout over the next few years. If that ends up being the case, the purchase price multiple to LTM would jump from 3.8x to 4.7x, consistent with L’Oréal’s acquisition of Aesop in 2023.
Though some critics may believe that Rhode’s valuation is inflated due to its viral online presence, the most recent numbers suggest that e.l.f. Beauty made an opportunistic acquisition, and the purchase price for Rhode may have carried significant potential given the synergies between components of the two companies. It is empowering to see a female-founded business not only disrupt the industry but also have Hailey Bieber’s creative, female-forward vision work legitimized by its $1 billion valuation.
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