Regulatory Due Diligence Objectives
The main objective of due diligence during a cosmetic brand acquisition is to ensure product compliance, thereby avoiding:
- Consumer risks due to non-compliance with regulations.
- Costs related to distribution delays and compliance fees.
- Negative impact on the acquirer's image and marketing costs.
Recent Acquisition Examples
Several major brands have recently used due diligence to secure their acquisitions:
- Puig and Dr. Barbara Sturm: In January 2024, the Spanish group Puig acquired a majority stake in the German luxury skincare brand Dr. Barbara Sturm, strengthening its presence in the luxury segment.
- e.l.f. Beauty and Naturium: In August 2023, e.l.f. Beauty announced the acquisition of skincare brand Naturium for approximately $355 million, consolidating its position in the affordable and effective skincare market.
- Unilever and K18: In December 2023, Unilever announced its intention to acquire the innovative haircare brand K18, specializing in hair repair treatments. The financial terms of the agreement were not disclosed.
- Shiseido and Dr. Dennis Gross Skincare: In December 2023, Shiseido signed a definitive agreement to acquire DDG Skincare Holdings LLC, the owner of Dr. Dennis Gross Skincare, strengthening its portfolio of prestige dermatologist-led skincare.
- Bridgepoint and RoC Skincare: In January 2024, the European investment firm Bridgepoint announced the acquisition of anti-aging skincare brand RoC Skincare from Gryphon Investors, aiming to accelerate its growth and development.
- L Catterton and Stripes Beauty: In June 2024, L Catterton invested in Stripes Beauty, a menopause-focused skincare brand founded by actress Naomi Watts, aiming to innovate in health solutions for aging.
- L'Oréal and Aēsop: In April 2023, L'Oréal signed an agreement to acquire the Australian luxury brand Aēsop from Natura &Co for an enterprise value of $2.525 billion, marking its largest acquisition to date.
These transactions were secured through a rigorous due diligence process, ensuring that the acquired assets met regulatory requirements and quality standards. Regulatory due diligence is a crucial step in any cosmetic or fragrance brand acquisition. Its primary goal is to verify the alignment between the regulatory compliance claimed by the brand and its actual compliance. Indeed, the absence or insufficiency of control may expose the acquirer to major financial risks, hidden costs related to non-compliance, or even damage to its brand image.
An Opportunity to Secure
Acquiring a cosmetic brand represents a strategic opportunity to expand product portfolios, enter new markets, or strengthen legitimacy in promising segments such as natural, luxury, or dermocosmetics. However, this opportunity cannot be fully realized without a thorough regulatory evaluation.
Risks of Non-Compliance
Non-compliance can generate:
- Compliance costs (reformulation, repackaging, updating claims);
- Distribution delays, compromising expected sales;
- Financial risks related to potential fines, market withdrawals, or litigation;
- Damage to the acquirer's image, calling into question its professionalism;
- Risks to consumer safety, with the ethical and legal consequences that this implies.
Comprehensive Due Diligence Approach
A well-executed regulatory due diligence covers:
- Analysis of formulas, ingredients, and raw materials (compliance with Annexes of Regulation (EC) No. 1223/2009, handling of CMRs, etc.);
- Regulatory status of products claimed as cosmetics (vs medical devices, biocides, etc.);
- Compliance of marketing claims and labeling;
- Product safety obligations, including the latest scientific opinions from the SCCS;
- Verification of proper safety assessments and maintenance of the Product Information File (PIF);
- Declaration in European databases (CPNP), British databases (SCPN), and non-EU registrations if relevant.
Conclusion
In a competitive international market, regulatory due diligence is a strategic safeguard. It protects the acquirer, ensures consumer safety, and guarantees the commercial and regulatory feasibility of the project. A compliant and well-documented brand enables quick integration, smooth communication with authorities, and flawless execution of sales.
At EcoMundo, we offer regulatory compliance services to assist you throughout your brand acquisitions. With our expertise in cosmetic regulation, we help you avoid risks related to non-compliance and ensure consumer safety. Contact us today to discover how our solutions can secure your investments.
Regulatory Due Diligence Objectives
The main objective of due diligence during a cosmetic brand acquisition is to ensure product compliance, thereby avoiding:
- Consumer risks due to non-compliance with regulations.
- Costs related to distribution delays and compliance fees.
- Negative impact on the acquirer's image and marketing costs.
Recent Acquisition Examples
Several major brands have recently used due diligence to secure their acquisitions:
- Puig and Dr. Barbara Sturm: In January 2024, the Spanish group Puig acquired a majority stake in the German luxury skincare brand Dr. Barbara Sturm, strengthening its presence in the luxury segment.
- e.l.f. Beauty and Naturium: In August 2023, e.l.f. Beauty announced the acquisition of skincare brand Naturium for approximately $355 million, consolidating its position in the affordable and effective skincare market.
- Unilever and K18: In December 2023, Unilever announced its intention to acquire the innovative haircare brand K18, specializing in hair repair treatments. The financial terms of the agreement were not disclosed.
- Shiseido and Dr. Dennis Gross Skincare: In December 2023, Shiseido signed a definitive agreement to acquire DDG Skincare Holdings LLC, the owner of Dr. Dennis Gross Skincare, strengthening its portfolio of prestige dermatologist-led skincare.
- Bridgepoint and RoC Skincare: In January 2024, the European investment firm Bridgepoint announced the acquisition of anti-aging skincare brand RoC Skincare from Gryphon Investors, aiming to accelerate its growth and development.
- L Catterton and Stripes Beauty: In June 2024, L Catterton invested in Stripes Beauty, a menopause-focused skincare brand founded by actress Naomi Watts, aiming to innovate in health solutions for aging.
- L'Oréal and Aēsop: In April 2023, L'Oréal signed an agreement to acquire the Australian luxury brand Aēsop from Natura &Co for an enterprise value of $2.525 billion, marking its largest acquisition to date.
These transactions were secured through a rigorous due diligence process, ensuring that the acquired assets met regulatory requirements and quality standards. Regulatory due diligence is a crucial step in any cosmetic or fragrance brand acquisition. Its primary goal is to verify the alignment between the regulatory compliance claimed by the brand and its actual compliance. Indeed, the absence or insufficiency of control may expose the acquirer to major financial risks, hidden costs related to non-compliance, or even damage to its brand image.
An Opportunity to Secure
Acquiring a cosmetic brand represents a strategic opportunity to expand product portfolios, enter new markets, or strengthen legitimacy in promising segments such as natural, luxury, or dermocosmetics. However, this opportunity cannot be fully realized without a thorough regulatory evaluation.
Risks of Non-Compliance
Non-compliance can generate:
- Compliance costs (reformulation, repackaging, updating claims);
- Distribution delays, compromising expected sales;
- Financial risks related to potential fines, market withdrawals, or litigation;
- Damage to the acquirer's image, calling into question its professionalism;
- Risks to consumer safety, with the ethical and legal consequences that this implies.
Comprehensive Due Diligence Approach
A well-executed regulatory due diligence covers:
- Analysis of formulas, ingredients, and raw materials (compliance with Annexes of Regulation (EC) No. 1223/2009, handling of CMRs, etc.);
- Regulatory status of products claimed as cosmetics (vs medical devices, biocides, etc.);
- Compliance of marketing claims and labeling;
- Product safety obligations, including the latest scientific opinions from the SCCS;
- Verification of proper safety assessments and maintenance of the Product Information File (PIF);
- Declaration in European databases (CPNP), British databases (SCPN), and non-EU registrations if relevant.
Conclusion
In a competitive international market, regulatory due diligence is a strategic safeguard. It protects the acquirer, ensures consumer safety, and guarantees the commercial and regulatory feasibility of the project. A compliant and well-documented brand enables quick integration, smooth communication with authorities, and flawless execution of sales.
At EcoMundo, we offer regulatory compliance services to assist you throughout your brand acquisitions. With our expertise in cosmetic regulation, we help you avoid risks related to non-compliance and ensure consumer safety. Contact us today to discover how our solutions can secure your investments.
