Key Considerations for a Successful Acquisition in the Beauty & Fashion Sector in France and EU

1. Deal Structure: Share vs. Asset Acquisition

The choice between a share purchase and an asset purchase is foundational. Each has distinct implications for risk allocation, tax efficiency, and operational continuity:

• Share Deal: Acquiring the target’s shares transfers all assets and liabilities (known and unknown). This structure is common for established brands with clean corporate histories but requires exhaustive due diligence to uncover potential "skeletons" (e.g., legacy litigation, tax liabilities, or regulatory non-compliance).

• Asset Deal: Allows the buyer to selectively acquire IP (trademarks, formulations), inventory, or contracts while excluding unwanted liabilities. Particularly advantageous for distressed targets or when the buyer seeks specific assets (e.g., a flagship brand without inheriting debt).

Practical Tip: In France, asset deals may trigger higher transfer taxes (e.g., droit d’enregistrement at 3%–5%), whereas share deals often benefit from lower rates (0.1% for commercial companies). Employment transfers under asset deals also require compliance with the Code du Travail (e.g., automatic transfer of employees under Article L.1224-1 of the French Employment Code).

2. Due Diligence: Beyond Financials

The cosmetics and fashion sectors present unique risks that demand specialized due diligence:

• Regulatory Compliance: Verify conformity with EU Cosmetic Regulation 1223/2009 (e.g., Product Information Files, safety assessments, and CPNP notifications). Non-compliant labeling or unapproved claims can trigger recalls or fines.

• IP & Brand Integrity: Assess trademark portfolios (including geographical indications for luxury goods), design patents, and domain names. Counterfeit exposure or licensing disputes can erode value.

• Supply Chain & ESG: Scrutinize supplier contracts, sustainability commitments (e.g., France’s AGEC Law "Loi anti-gaspillage pour une économie circulaire" banning destruction of unsold goods), and ethical sourcing (e.g., Forced Labor Prevention Act implications).

• Data & Digital Assets: Review GDPR compliance for customer databases, e-commerce platforms, and influencer partnerships—critical for DTC brands.

3. Key Transaction Documents

• SPA/APA: Tailor warranties to cover sector-specific risks (e.g., "All products have compliant INCI listings"). In France, garantie d’actif et passif (asset/liability guarantees) are heavily negotiated.

• Disclosure: Sellers must disclose exceptions to warranties (e.g., pending litigation over a counterfeit batch). French courts enforce strong obligation de diligence on buyers to verify disclosures.

• Indemnities: Demand specific protections for latent risks (e.g., "Seller indemnifies Buyer for any penalties related to pre-closing REACH violations").

  
  

4. Regulatory Hurdles in France/EU

• Competition Filings: Mandatory for deals exceeding EU turnover thresholds (e.g., €150M in France). The Autorité de la Concurrence closely scrutinizes luxury sector mergers.

• Foreign Investment Review: Non-EU buyers of French cosmetic brands may require approval under Decree No. 2019-1590 (e.g., if the target holds sensitive tech or data).

  
  

5. Post-Closing Integration

• Employment: specific regulations to protect employees' rights apply in asset deals; consult works councils (comité social et économique) early to avoid delays.

• IP Transfers: Record assignments with INPI (French IPO) and EUIPO. Delays risk third-party challenges.

• Tax: Optimize VAT recovery on acquired assets and align transfer pricing for cross-border deals.

  
  

Conclusion

The beauty and fashion sectors’ allure—brand equity, innovation, and global reach—comes with layered complexities. A disciplined approach to due diligence, coupled with robust contractual safeguards, is indispensable.

In France, local legal nuances (from labor law to foreign investment controls) further underscore the need for experienced counsel to navigate pitfalls and unlock value.

Focus: Cross-border transactions in luxury goods, cosmetics, and retail.

Jurisdictions: France, EU, and Swiss law markets.

This note reflects market practices as of 2024. Legal advice should be sought for specific transactions.