Private Equity Value Creation in the K-Beauty Supply Chain: Strategic Asset Repositioning and ODM-Driven Growth

The K-Beauty sector has emerged as a global powerhouse, driven by cultural exports like K-pop and K-drama, which have amplified brand visibility and consumer demand. For private equity (PE) firms, this boom has created a unique opportunity to reposition assets within the supply chain and leverage original design manufacturers (ODMs) to drive scalable growth. Between 2020 and 2025, South Korea’s cosmetics industry attracted over KRW2.3tn ($1.6bn) in deals in 2024 alone, with PE firms targeting high-growth brands, contract manufacturers, and regional expansion opportunities [2]. This analysis explores how strategic asset repositioning and ODM-driven strategies are unlocking value in the K-Beauty ecosystem.

Strategic Asset Repositioning: M&A and Global Expansion

Private equity firms are aggressively reshaping the K-Beauty landscape through mergers and acquisitions (M&A), focusing on brands with strong digital-first strategies and global e-commerce access. For instance, Goodai Global, a K-beauty unicorn, secured a $600 million funding round led by IMM Private Equity and other top-tier firms to acquire indie brands like Beauty of Joseon and Skinfood [1]. This M&A-driven approach mirrors strategies employed by global players like L’Oréal, which has acquired Korean beauty brands for their intellectual property and innovation [5].

The U.S. market, in particular, has become a focal point for repositioning. Brands like COSRX, acquired by Amorepacific in 2023, now generate 60% of their revenue from the U.S. and Europe, driven by products such as its snail essence serum [3]. Similarly, Jeisys Medical, a skincare device manufacturer, was acquired by Archimed, while Manyo Factory—famous for its product placement in Crash Landing on You—has attracted interest from PE firms like KL & Partners [3]. These transactions reflect a broader trend of PE firms capitalizing on K-Beauty’s cultural cachet to scale brands in high-growth markets.

Data from 2025 shows that early-stage funding in the sector rebounded, with $4.9 million raised in the first four months of the year, signaling renewed investor confidence [5]. This "reverse pitch" dynamic—where PE firms approach startups before owners consider selling—has created a seller’s market, with valuations rising amid fierce competition [3].

ODM-Driven Growth: Consolidation and Innovation

Original design manufacturers (ODMs) are the backbone of K-Beauty’s global expansion, and PE firms are increasingly investing in these firms to consolidate supply chains and enhance efficiency. Cosmax Inc. and Kolmar Korea Co., two leading ODMs, reported record quarterly profits in 2025 due to surging exports of indie beauty brands into international markets [3]. These firms are not only expanding production capacity but also adopting digital transformation tools like AI and IoT to accelerate product innovation and consumer engagement [4].

The outsourcing cosmetics manufacturing market, valued at $30.79 billion in 2024, is projected to grow to $45.37 billion by 2033, underscoring the critical role of ODMs in the beauty industry [5]. For example, CNC International, South Korea’s fourth-largest cosmetics ODM, has received consistent offers from global PE firms, while Firmtech Korea, a key player in cosmetics packaging, is seen as a strategic asset due to its dominance in the industry value chain [6].

PE-backed ODMs are also diversifying geographically to mitigate risks from tariffs and geopolitical tensions. As one report notes, “Private equity investors favor long-term growth strategies over short-term cost-cutting, emphasizing regional diversification and localized sourcing to enhance supply chain resilience” [5]. This shift is evident in the expansion of K-Beauty brands into Southeast Asia and the Middle East, where ODMs are establishing new production hubs to meet demand [3].

Challenges and Resilience in the Supply Chain

Despite the sector’s momentum, challenges persist. Tariffs, rising production costs, and geopolitical risks have slowed M&A activity in chemical and ingredient sectors [5]. However, personal care ingredients remain resilient, with PE firms prioritizing innovation and sustainability to future-proof their investments. For instance, BENOW, South Korea’s second beauty unicorn, has leveraged ODM partnerships to scale its product line while maintaining cost efficiency [2].

Conclusion: A Lucrative Future for K-Beauty and PE

The K-Beauty supply chain offers a compelling case study in private equity value creation. By repositioning assets through strategic M&A and leveraging ODM-driven growth, PE firms are not only capitalizing on current trends but also future-proofing their portfolios against global uncertainties. As the sector continues to expand into North America, Europe, and emerging markets, the synergy between PE capital and K-Beauty’s cultural influence will likely drive further innovation and profitability.

Source:
[1] PE Firms join $600M raise for K-beauty player Goodai, [https://www.marketsgroup.org/news/pe-firms-join-600m-raise-for-k-beauty-player-goodai]
[2] K-beauty boom fuels $1.6bn deal spree as private equity ..., [https://pe-insights.com/k-beauty-boom-fuels-1-6bn-deal-spree-as-private-equity-chases-south-koreas-rising-stars/]
[3] K-beauty contract manufacturers see record Q2 profits, [https://www.kedglobal.com/beauty-cosmetics/newsView/ked202507160002]
[4] OBM Business Model in the Era of Digital Transformation, [https://link.springer.com/chapter/10.1007/978-981-95-0253-0_2]
[5] Outsourcing Cosmetics Manufacturing Market Size, Share, [https://www.globalgrowthinsights.com/market-reports/outsourcing-cosmetics-manufacturing-market-115692]
[6] As K Beauty shows explosive growth, love calls from foreign private equity funds pour in, [https://www.mk.co.kr/en/stock/11386678]