Brand, Craft and Control: Legal Considerations in Luxury Goods M&A

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Amid market instability and geopolitical uncertainty, the global luxury goods industry has remained robust, with the market for companies with luxury portfolios spanning fashion, jewelry, watches and cosmetics being valued at approximately US$418 billion.^[1] It is no surprise that mergers and acquisitions (“M&A”) activity in the luxury goods industry remains an attractive option, allowing companies operating within that space to diversify product offerings, expand geographically and capture efficiencies across distribution, marketing and manufacturing networks.

Transaction activity in the sector has been both steady and strong over the past two decades but has increased in recent years. In 2022 alone, approximately 292 M&A deals occurred in the global luxury goods industry, representing the highest level of deal activity observed in the preceding five-year period. Furthermore, the average value of deals in the apparel and accessories segment reached approximately US$1.5 billion, reflecting the significant brand equity and intangible value associated with luxury assets.^[2]

Several high-profile transactions illustrate the strategic importance of acquisitions in this sector. For example, in January 2017, the Essilor-Luxottica merger, valued at approximately 46 billion euros, created the world’s largest eyewear group, and in November 2019, the French luxury conglomerate LVMH acquired U.S. jewelry house Tiffany & Co. for approximately US$16.2 billion, one of the largest luxury transactions in history. Other notable deals include Estée Lauder’s acquisition of Tom Ford for US$2.8 billion in November 2022, Gucci-owned Kering’s acquisition of French fragrance-label Creed in June 2023 for US$3.8 billion and Prada’s acquisition of Versace in April 2025 for approximately US$1.375 billion.^[3]

Against this backdrop, private M&A transactions involving luxury brands present distinct legal and commercial considerations. Unlike many other industries, luxury brands derive a significant portion of their value from intangible assets such as brand heritage, intellectual property (“IP”), reputation and exclusivity. As explored in this article, these intangible assets must be carefully protected at every stage of an M&A transaction in the luxury brands industry.

Evaluating Potential Targets and Acquirors

In the luxury goods sector, a prospective acquiring company (“Acquiror”) will evaluate a potential target company (“Target”) based on considerations that extend beyond traditional financial metrics in order to establish an initial estimated purchase price and settle on a fair letter of intent (“LOI”). For example, Acquirors will often assess a Target’s brand adjacency, considering whether the Target’s aesthetic heritage complements the aesthetic heritage of the Acquiror’s existing brands. Brand adjacency can introduce integration challenges, thus leading Acquirors to negotiate a lower purchase price. Targets with robust IP profiles, however, such as globally recognized trademarks and design patents, alongside strong customer loyalty metrics, are in a better position to negotiate a higher purchase price.

Targets will also closely scrutinize a potential Acquiror’s stewardship pedigree to ensure their brand heritage will be preserved rather than diluted post-close. LVMH’s handling of Tiffany after the acquisition is often cited as a positive denouement: the company maintained creative independence for Tiffany’s design teams, safeguarding its iconic status. This contrasts with Blackstone’s post-acquisition pivot for Creed, where a shift toward mass-affluent diffusion lines arguably eroded some of the brand’s elite positioning. To protect against such risks and prevent auctions that could commoditize prestige through leaks or bidding wars, LOIs typically include binding exclusivity periods of 60 to 120 days alongside no-shop covenants and specifications regarding post-close autonomy.^[4]

Conducting Due Diligence

Due diligence in luxury brand acquisitions typically focuses heavily on IP assets, as brand identity and trademarks often represent the most valuable components of a Target’s business. Luxury brands rely on trademarks, trade dress, copyright, geographical indications and industrial design rights to differentiate their products and maintain exclusivity. Ensuring that these rights are valid and enforceable and that consideration is given to the benefits of registration in all relevant jurisdictions is a critical diligence exercise, given IP often represents 60 to 80% of a luxury brand’s worth.^[5] Acquirors must conduct exhaustive chain-of-title verification of rights in all trademarks, copyrights, geographic indications and industrial designs used in association with goods sold under the luxury brand, and all IP licensing agreements relating to those rights. Royalty audits help identify under-monetized streams or termination risks triggered by change-of-control. Counterfeiting checks are also conducted, given the US$500-billion annual global counterfeit market.^[6]

Brand reputation and consumer perception are other key areas of diligence. Luxury brands depend heavily on prestige and consumer trust, and reputational damage can significantly reduce brand value. Acquirors therefore often review the Target’s marketing practices, social media presence and public relations history to assess potential reputational risks.

Supply chain integrity is also an important area of review. Many luxury brands emphasize craftsmanship and geographic origin as part of their brand identity, but such claims must be supported by actual manufacturing practices. Acquirors must therefore verify supplier relationships, manufacturing locations and quality control procedures, and must also map suppliers from tier-1 (direct manufacturers) to tier-3 (raw material miners) to conceptualize any associated risks arising from geopolitical instability and environmental impacts (e.g., improper waste management as a result of poor manufacturing processes), which may lead to supply chain and production disruptions.

Acquirors should also examine a potential Target’s supply chain to ensure that ethical labour practices are used throughout – an especially important consideration for ensuring compliance with local and international labour laws, and any anti-forced labour and anti-child labour legislation that requires public disclosure of any risks that forced labour and child labour are used in a reporting entity’s supply chain, and any preventative and mitigating measures taken in respect of the same.

Given the areas of focus in an Acquiror’s due diligence, Targets can make themselves far more attractive to potential Acquirors by taking proactive steps to organize their records, finances and key assets. These preparations not only streamline the due diligence process but also signal operational maturity and reduce perceived risks, often leading to higher valuations and smoother negotiations. Specifically, Targets can demonstrate strong IP management by compiling a complete, audited chain-of-title for all trademarks, design registrations, copyrights and licensing agreements, ensuring enforceability of IP rights in the jurisdictions where such IP is registered. Targets can also demonstrate strong supply chain management by documenting supplier relationships to ensure traceability and compliance with local and international ethical standards and sustainable production. Targets can also conduct mock diligence to proactively spot any gaps, address legal issues and even pre-populate a virtual data room for potential Acquirors, ensuring a smoother diligence process during a potential acquisition.

Given the commercial sensitivity of information disclosed during the due diligence process, it is imperative that Targets take appropriate measures to protect their proprietary information. Such measures include ensuring that the parties are bound by strong non-disclosure agreements before any diligence commences, with such agreements including provisions such as use restrictions, non-circumvention clauses (limiting an Acquiror’s ability to approach suppliers, manufacturers or distributors they learn about during diligence), non-solicitation obligations, return/destruction obligations if the deal does not proceed and equitable relief provisions allowing injunctions if the information is misused. Targets may also favour a phased disclosure process, where sensitive information is released in tiers, rather than all at once, and information such as a Target’s corporate structure, high-level financials, IP portfolio summaries and general supplier categories are released in the early diligence stages, with detailed financial models, licence agreements and limited operational details to follow, and full supplier lists, key formulas, manufacturing processes, proprietary techniques and detailed marketing strategies being released near signing. Certain data room controls may also be introduced (e.g., to prevent downloads or to permit time-limited access to only a few external advisors with professional, ethical constraints, such as lawyers and accountants) and documents and information may be released in redacted or summarized form, with the full information to be revealed only after signing (before closing) or post-closing.

Negotiating and Finalizing Key Transaction Documentation

Share purchase agreements and asset purchase agreements (collectively, “Definitive Agreements”) in luxury goods M&A transactions require tailored representations and warranties beyond standard corporate terms to protect brand prestige, IP and supply chain integrity.

Targets will typically represent that they have “full right, title and interest” in IP such as trademarks, designs, copyrights and domain names, and a schedule to the applicable Definitive Agreement will set out comprehensive registration details for such IP. Acquirors will also typically require that Targets represent that all IP licences are valid, that there are no known infringement claims or material IP disputes, and that the Target has implemented adequate anti-counterfeiting programs. Targets with internationally manufactured products are also frequently required to represent as to the accuracy of their advertising, the authenticity of their inventories and compliance with applicable customs laws. Non-competition and non-solicitation provisions will typically be introduced (with the length of such non-compete periods varying depending on the jurisdiction in which they will be enforced), especially for key Target personnel with close and sophisticated knowledge of the Target’s IP.

Recent market trends indicate that supply chain representations and warranties have become standard, particularly with respect to operations in high-risk jurisdictions, with Targets representing that they and their suppliers comply with applicable labour, environmental and human rights standards. Furthermore, full audits and compliance records are now regularly attached as additional schedules to Definitive Agreements. However, particularly given the preference for phased disclosure in luxury goods M&A deals, the use of representation and warranty insurance to safeguard Acquirors against undisclosed liabilities, such as IP‑infringement claims, tax disputes or pending litigation, is becoming an increasingly attractive option for potential Acquirors.

Financially, luxury goods M&A deals often involve complex working‑capital adjustments, earnouts and indemnification frameworks that can generate post‑closing disputes if not clearly defined. Definitive Agreements should spell out unambiguous formulas for closing‑account calculations, especially for high‑value inventory and season‑dependent revenue, and provide a clear timeline and dispute‑resolution mechanism for any challenges. When earnout structures are tied to future growth in categories such as ready‑to‑wear, fragrance or accessories, the parties must define precise KPIs and audit rights and decide whether the original founders or minority‑seller managers retain operational control over the metrics being measured.

For luxury goods M&A deals involving a period between the signing of the Definitive Agreements and the closing of the deal, it is imperative that the Definitive Agreements include particular interim operating covenants and material adverse change (“MAC”) clauses to maintain the Target’s value during the pre-closing period. Acquirors will commonly insist on clauses that maintain stasis across key areas: strict pricing discipline to avoid flash sales that erode scarcity premiums, no retail footprint changes (e.g., outlet expansions that would challenge the exclusivity of the brand), no shifts in creative direction, including designer poaching protections, and no supplier switches that could disrupt artisanal sourcing. MAC clauses in such transactions also explicitly enumerate luxury-specific triggers, such as reputational scandals, IP challenges or supply disruptions.

To ensure creative continuity, Acquirors and Targets will also negotiate and enter into consulting or employment agreements to ensure leadership continuity, preserve the brand’s creative vision and align incentives for post-close success. Key creative talent is often targeted, including founders, creative directors or designers central to the brand’s identity, as such individuals have deep customer and stakeholder ties that stabilize value post-close. Compensation in such agreements is typically tied to revenue milestones and will often feature non-circumvent IP clauses and creative veto rights over dilution risks. Executive compensation for such persons often involves retention bonuses and other equity incentives, such as restricted share units. Definitive Agreements will also include robust indemnification undertakings or mandate tail insurance for outgoing directors and officers, so that founder‑designers or former management can continue to advise creatively without personal liability risk.

Post-Closing Considerations

At the post-closing stage, the parties’ focus is on ensuring that the strategic value of the acquisition crystallizes. Governance, brand integrity and talent retention become central priorities.

Following closing, the parties should promptly refresh the target’s board and senior management structure, ensuring it meets local corporate law requirements while preserving key creative leaders and design voices that underpin the brand’s identity. This often involves negotiating board representation, observer rights or advisory roles for the original founder‑designer or family owners.

Equally important is the integration of IP and brand strategy, since luxury brand value is largely intangible and IP‑heavy. Acquirors must record assignments of trademarks, designs and trade secrets, update domain names and social media handles, and validate or renegotiate licensing arrangements so that the brand’s exclusive positioning is not diluted. Creative‑director and design‑team covenants (including retention provisions and non‑compete and non-solicitation obligations) should be implemented carefully to avoid losing the very talent that made the acquisition attractive, while also clarifying how far the parent group may evolve product lines or aesthetics without undermining core brand equity.

From a commercial standpoint, luxury consumers expect seamless service and continuity, so any post‑closing disruption to stores, e‑commerce platforms or ateliers can quickly damage the brand’s image. Acquirors must ensure uninterrupted supply chain relationships, renegotiate key vendor and distributor agreements where necessary, and integrate boutique operations and client‑relationship systems into the parent group’s standards without sacrificing the Target’s distinctive service culture. Employment integration is another critical area: aligning compensation, benefits and incentive structures with the Acquiror’s policies, while avoiding abrupt changes that trigger mass turnover in skilled sales associates, artisans and store managers, is essential to preserving the brand’s operational quality and client experience.

Tax and regulatory follow‑through must be treated as a disciplined project, not an afterthought. Acquirors should update VAT, GST or sales‑tax registrations, confirm transfer‑pricing documentation for intercompany transactions and file any required ownership‑change notifications with competition, customs or trade authorities – particularly where the deal expands the brand’s access to new markets or distribution channels.

Public relations, client communications and “brand‑ethos” safeguards complete the post‑closing picture: co-ordinated announcements, VIP client outreach and in‑store messaging should emphasize continuity, craftsmanship and long‑term investment rather than cost‑cutting, while some deals may include informal brand‑stewardship covenants that require the parent group to maintain certain heritage elements, sustainability standards or made‑in‑country commitments. Together, these post‑closing steps ensure that the luxury brand premium does not disappear once the pen is put down.

The Capital Markets Group and Corporate Group at Aird & Berlis LLP frequently assist public and private companies across various industries in completing M&A transactions that grow and enhance their businesses for the immediate and long-term benefit of their stakeholders. We will continue to monitor developments in the private M&A sphere, particularly those impacting luxury brand companies. Please contact the authors or any member of the groups if you have questions or require assistance.

[1] M&A in the Luxury Goods Sector – Statistics & Facts | Statista.