Judy Almasoud, LL.M. Candidate, 2026

e.l.f. Beauty recently announced its $1 billion acquisition of Rhode—one of the largest beauty deals of the decade and the company’s  biggest acquisition to date. Founded in 2022 by Hailey Bieber, Rhode quickly became profitable and generated $212 million in net sales with a substantial margins in the twelve-month period ending March 31, 2025. Product launches frequently sold out within hours, creating a whirlwind of momentum that garnered the attention of industry insiders and investors keen on capitalizing on its success, Beyond its headline value, the transaction stands out for its complexity and potential to reshape the competitive landscape of the beauty industry.

e.l.f. is both cautious and ambitious in this transaction, structuring the deal to balance immediate value with trust in long-term growth potential. At closing, e.l.f. will pay $800 million—$600 million in cash and $200 million in stock—with up to $200 million is contingent on Rhode’s performance over the next three years. Earnout provisions like these are common in fast-growth acquisitions, but they are also among the most litigated deal terms, as disputes often arise over how performance is defined, which accounting standards apply, or whether post-closing actions affect results. Consequently, these provisions typically include explicit language that outlines unambiguous metrics for performance evaluations and dispute resolution.

Beyond financial terms, the transaction also highlights the legal mechanisms used to preserve a target’s brand identity. Hailey Bieber will remain a fundamental part of Rhode’s future as Founder retention provisions of this kind are legally significant: they may include non-compete clauses, incentive compensation, and intellectual property protections to secure the very authenticity that underpins brand value. Rhode has faced trademark disputes in the past, underscoring why IP due diligence is a cornerstone of acquisitions in consumer brands.

From a market perspective, this deal marks e.l.f.’s largest acquisition to date, surpassing its 2023 purchase of Naturium. Rhode has built a solid relationship with Gen Z consumers, and its management has proven their ability to generate excitement with product launches that emphasize scarcity and exclusivity. Now, the brand is preparing to expand beyond its online-first model, with its products entering Sephora stores across North America and the UK. This expansion will test whether Rhode can keep its cult-like appeal even as it shifts from a limited, exclusive model to wider retail distribution.

As Rhode prepares to expand its distribution footprint, the acquisition’s success will depend as much on its legal framework as on market strategy. e.l.f. received advice from Latham & Watkins, which assigned a multidisciplinary team spanning corporate, securities, tax, intellectual property, employment, and antitrust law. Transactions of this scale require coordination across multiple regulatory, contractual, and compliance fronts, not only to integrate physical assets and operations, but also align compliance and governance structures.

Moreover, such large-scale, multidimensional deals also have broader market ramifications. The acquisition underscores e.l.f.’s ambition to extend its reach in the beauty market while maintaining its reputation for affordability. At the same time, concerns have been raised about whether macroeconomic pressures such as tariffs, inflation, and supply-chain costs will impact margins and the success of integration.

The risks are apparent: Rhode could lose its identity within a larger entity, the earn-out could lead to disputes over performance criteria, and uncertainties in global conditions may threaten scaling (at least in the timeframe and approach set forth by current conversations). However, the opportunity is equally significant. If e.l.f. manages the transition carefully, it gains not only a billion-dollar skincare line, but an engaged community, a cultural aesthetic, and enduring consumer loyalty.

Ultimately, the Rhode deal highlights more than a billion-dollar valuation: it illustrates reveals how modern acquisitions blend law, business, and culture. The earn-out provision functions as a contract law mechanism to harmonize risk between buyer and seller, reflecting how agreements attempt to balance ambition with protection. At their core, contracts in transactions like this are tools of trust and alignment, structuring the terms that allow companies to capture both tangible assets and intangible value.

The Rhode deal demonstrates how today’s M&A in consumer industries merges legal structure with cultural relevance. Earn-out provisions, retention clauses, intellectual property protections, fiduciary duties, and regulatory approvals together make up the legal architecture that determines whether this $1 billion investment pays off over time. The outcome of the Rhode deal will show whether contracts and corporate governance can capture something as abstract as brand authenticity.