More than half a century ago, Revlon founder Charles Revson famously described the true business of cosmetics makers: “We sell hope.” Today the same could be said about what the large, established beauty houses see in small, social media-driven makeup companies. The prospect of wooing the millions of millennials who base their makeup and skin-care purchase decisions on online likes, follows, and reviews from influencers has sparked a feeding frenzy for small, hip brands. The 52 acquisitions in the beauty and personal care industry last year were the most in a decade, and some of the hottest targets were private brands with massive social media fan bases, according to investment bank Financo LLC. If there’s any slowdown this year, it’ll only be because demand for buyout candidates outstrips supply, says Colin Welch, a managing director at TSG Consumer Partners LLC, which bought a minority stake in a little line called IT Cosmetics in 2012. The company reached sales of $182 million last year, when TSG orchestrated its sale to L’Oréal SA for $1.2 billion. “There’s a lot of capital chasing investments,” says Welch. Big cosmetics companies used to turn up their noses at any acquisition with less than $100 million in annual sales, says Vennette Ho, a managing director at Financo. Now there’s practically no bottom because revenue can climb fast if a line suddenly catches digital fire. That’s because millennials and teens are so receptive to social media tips on what to buy, and because word-of-mouth is the primary factor behind as much as 50 percent of their purchasing decisions, according to McKinsey & Co. 

Questions for Discussion 

1. What obstacles could occur with regard to designing an effective organizational structure with the acquisition of these smaller businesses by large, global conglomerates? 

2. If you were a manager in a small cosmetics company, what would be your strategy to ensure your employees continue to experience job enlargement and job enrichment once your firm was acquired? 

3. If you were responsible for redesigning the organizational structure for one of the newly acquired companies discussed in this case, would you use a functional structure or a divisional structure? Explain your reasoning. 

4. Does the strong socialmedia presence of the acquired cosmetics businesses discussed in this case encourage strategic alliances among managers in various parts of the combined organization? Why or why not?