And in an era when the mega beauty firms all have portfolios teeming with brands across multiple retail channels and categories, acquisitions might be the only way to meaningfully grow their businesses. Starting new brands from scratch is time-consuming, capital-intensive and high risk, which may explain why mergers and acquisition activity in the beauty industry is heating up this season. Last Wednesday, L'OrÃ©al USA said it made a deal to acquire nail polish company Essie Cosmetics, and in the last month Avon Products Inc. bought two smaller-sized brands -- the children's personal care line Tiny Tillia and Liz Earle Beauty Co.
Most of the 14-year-old brand's peers have already been bought by big companies, namely the aforementioned MAC and Bobbi Brown, and Laura Mercier and NARS Cosmetics.
Smashbox generates an impressive $250 million in retail sales, and has the aura of a hip, camera- and makeup artist-friendly range. With the right buyer, it could grow into a brand on par with MAC Cosmetics or Bobbi Brown, both of which are owned by the EstÃ©e Lauder Cos. Lauder has said its strategic priorities are focused on skin care and Asia. Smashbox does not fit into either bucket, but if Lauder chooses to buy Smashbox, the beauty firm would inarguably be the epicenter of makeup artist lines across department stores, single-brand boutiques, specialty stores and on television.
Avon, which has been on a buying spree of late, may view Smashbox as another brand to run through its well established direct-sales channel, and as a way to attract younger consumers. Or a company with a large fragrance portfolio, including Coty Inc. or Elizabeth Arden Inc., could see Smashbox as an opportunity to gain more muscle in additional beauty categories. Smashbox also has little presence abroad, so a company with a large international footprint may choose to acquire the brand and take it global.
All these scenarios, of course, hinge on the willingness of Smashbox's founders Dean and Davis Factor, the great-grandsons of legendary makeup artist Max Factor, to sell the company. Smashbox aligned itself with private equity firm TSG Consumer Partners in 2006, and according to industry sources has been intermittently meeting with potential strategic buyers for the last two years. But several observers say if the brothers don't get the price they want, they will wait. After all, they've waited this long.