Shelby Wild, founder of hair care line Playa, is suing the makeup brand Morphe and its majority owner, the private equity firm General Atlantic, in New York State court, alleging the companies failed to adequately support her brand after acquiring it in 2020.
Playa was one of several brands bought by Morphe after General Atlantic took a controlling stake in the retailer in the summer of 2019. In August 2020, around when the Playa deal closed, the entire portfolio was relaunched as Forma Brands, a beauty “incubator” that would turn emerging businesses into category giants.
At the time of the deal, Playa was a tiny but fast-growing brand. Founded by Wild, a former stylist, in 2017, it was sold at Sephora and received favourable write-ups in publications such as Allure and Vogue.
In the run-up to the acquisition, Wild said that General Atlantic discussed plans with her to grow Playa into a business with $50 million in annual revenue in five years, according to the court filing. Instead of receiving cash up front, the founder agreed to “longer-term incentive-based compensation through an employment contract,” according to the court documents.
Wild received a $200,000 signing bonus as part of the deal. But the prospect of a bigger payout quickly began to look remote. Playa’s sales in 2021 totalled $1.9 million, up from $400,000 in 2020 but less than half what Forma had projected, according to internal Forma Brands documents reviewed by BoF.
By the start of 2022, Forma’s efforts were focused on reviving Morphe, by far its biggest brand, which had seen sales sink from a reported $500 million in 2019 to $295 million in 2021. Forma also had ambitious plans for Ariana Grande’s makeup line, R.E.M. Beauty, which hit the market in November of last year.
In the internal documents, Forma Brands said it would “hold new product development on Playa and Bad Habit,” a beauty brand it launched in November 2020. It projected sales of $2 million for Playa for 2022, barely more than the prior year, according to the internal documents. Sephora dropped Playa earlier this year, the retailer previously confirmed.
Wild left the company in March. In the suit, Wild alleges that General Atlantic falsely represented itself as an incubator that would provide “the long-term logistical, operational, and financial support that the brand needed to reach its full potential.” She is seeking damages of $15 million, the maximum amount she said she would have been owed in “performance-based incentives” over four years. The suit was filed last week in the Supreme Court of the State of New York.
“Almost as soon as they took it over, it became clear that General Atlantic had sold me on a false promise,” Wild told BoF. “This culminated in their refusal to pay me the compensation I was owed from selling my company.”
General Atlantic declined to comment.
“We believe this suit is entirely without merit and we look forward to vigorously defending Morphe against these baseless allegations,” a Forma Brands spokesperson said in an email.
This is the latest development in a series of setbacks for Morphe and Forma Brands, which in October was rumoured to be exploring a Chapter 11 bankruptcy filing. It is estimated that the company has $600 million to $700 million in debt, according to Reorg Research.
