E.l.f. Beauty’s recent acquisition of the burgeoning skincare brand Rhode, valued at $1 billion, has sparked intense discussions about the implications for founder Hailey Bieber and the broader beauty industry. Reaction across social media platforms has been swift, with many speculating about the potential elevation of Bieber to billionaire status. However, the intricacies of corporate acquisitions and their impact on individual wealth often remain opaque, leading to misunderstandings about ownership stakes and the machinations behind such significant financial transactions.
At the heart of such mergers and acquisitions (M&A) lies a complex web of ownership stakes. Contrary to what many might assume, founders typically do not hold the majority of a company’s shares by the time it reaches a billion-dollar sale price. As Steve Reed, a clinical professor of law at Northwestern University, points out, the financial backers—those who invested early in the company’s development—often wind up retaining substantial ownership. This dilution of a founder’s ownership stake results from the need for external funding to scale the business. In many cases, like that of Rhode, the amount a founder reaps from an acquisition reflects their specific ownership percentage at the time of sale.
For instance, should a company sell for $100 million and a founder owns 10% of the shares, that leader would only walk away with $10 million. Similar calculations would apply in Rhode’s case, though precise figures on Bieber’s ownership remain undisclosed. Previous reports suggest she played a pivotal role in funding the brand and partnered with One Luxury Group, which may imply a substantial investment, yet the exact percentage she holds in Rhode is unclear.
The acquisition process itself often involves a labyrinthine negotiation stage that can take considerable time and requires discretion. Companies positioning themselves to sell may engage financial advisors to assess market interest, cultivating a slate of potential buyers while keeping discussions quiet from the public eye. Conversely, interested parties may independently approach the brand, expressing acquisition interest. However, negotiations can falter, as seen last year when Selena Gomez’s Rare Beauty halted its search for potential buyers despite a valuation estimated at $2 billion.
When negotiations do progress, the agreed-upon price for the acquisition incorporates various factors, including the acquirer’s cash reserves, prior sales performance, and prospective improvements to the brand. Reed emphasizes that acquiring firms aim to pay an economically rational price, taking care not to significantly overestimate the company’s value. This sensible approach to valuation is paramount; overpaying could jeopardize future profitability, leading to losses if the acquisition doesn’t align with the expected performance.
A significant component of Rhode’s acquisition is the inclusion of a potential earnout clause, which serves to address any divergence in valuations between the two negotiating parties. This structure allows for an adjustment to the final sale price based on the company’s performance post-acquisition. For example, should Rhode’s projected worth exceed initial estimates, the buyer will pay accordingly. Conversely, if the anticipated performance falters, the lower valuation prevails. This mechanism demonstrates a nuanced approach to balancing the buyer’s risk against the seller’s aspirations.
Celebrity endorsements have added a unique dynamic to the brand valuation landscape. Companies owned or founded by celebrities often enjoy elevated market perceptions due to their built-in fan circles. The allure of a celebrity can serve as a powerful sales catalyst, thereby enhancing the brand’s overall valuation. For instance, other successful celebrity-backed brands, such as Rihanna’s Fenty Beauty or Ariana Grande’s R.e.m. Beauty, illustrate how significant followings can translate into strong sales metrics and brand loyalty. Yet, not every celebrity venture resonates with consumers, leading to a diverse spectrum of successes and failures in this competitive space.
A critical question arises for founders contemplating the sale of their brands: what motivates such a move? While unique circumstances shape each decision, common reasons include reaching growth limitations, pursuing new entrepreneurial ventures, or the desire for a less demanding work environment. Reed articulates that founders might recognize they’ve maximized their brand’s potential and see value in aligning with a larger entity equipped with more robust distribution channels, increased marketing budgets, and experienced leadership.
While the prospect of becoming a billionaire through an acquisition is tantalizing, it is often contingent upon the ownership percentage maintained at the time of sale, as well as the final transaction price. An acquisition could drive significant financial gain, providing a substantial boost to a founder’s wealth. However, if their ownership stake is minimal, the payout may not achieve the billion-dollar headline some speculate about.
For Hailey Bieber, the impact of the Rhode acquisition on her wealth remains a subject of intrigue. While the narrative surrounding celebrity entrepreneurs often glamorizes wealth accumulation, the reality is far more nuanced. The occurrence of major acquisitions can lead to significant financial rewards for founders, provided they possess a substantial equity stake in their company. Thus, Bieber’s journey as an entrepreneur embodies the complexities inherent in navigating both the beauty industry and the financial dimensions of corporate acquisitions.
In the wake of such high-profile deals, the beauty sector continues to evolve, reflecting broader trends in consumer preferences and market dynamics. The Rhode acquisition not only signifies a substantial financial milestone but also underscores the ongoing interplay between celebrity influence and brand valuation in the contemporary business landscape. As the deal proceeds toward closure in the second quarter of fiscal 2026, it remains to be seen how this and similar acquisitions will shape the future of beauty brands and their founders in a rapidly changing market.