The Charlotte Tilbury Monkey Wrench

There’s a tidy of list of reasons why the Lauder/Puig merger didn’t happen, but the primary factor appears to be a change-in-control clause attached to Puig’s 2020 purchase of a 73.1 percent stake in red-hot makeup brand Charlotte Tilbury for a rumored $1.2+B. Puig has since upped its stake in the brand to 78.5 percent.

Tilbury still owns a little more than 20 percent of her brand and is evidently heavily involved in the day-to-day ops. And the second she got wind of a potential alliance between Lauder and Puig, Tilbury made it crystal clear that she would activate the change-in-control clause baked into her contract. And really, why wouldn’t she? If the Lauder/Puig merger had worked, Tilbury would have pocketed an additional $1B.

While Lauder is said to have known about the problematic clause from the get-go, when combined with other undesirable aspects of the deal that began bubbling to the surface, those additional monies earmarked for Tilbury started to feel like a deal-breaker—and perhaps a convenient one at that to get out of the deal.

Founding-Family Power Struggles 

Of course, a deal this big and buzzed-about rarely falls apart because of a single stumbling block, and there’s no shortage of palace intrigue around the proposed dalliance between these two family-founded enterprises. Although Lauder is much bigger than Puig—$33B vs roughly $9B—they both still have key family members in the mix. At ELC, it’s William Lauder (Executive Chairman, Chair of Board of Directors) and his cousin, Jane Lauder (Member, Board of Directors). At Puig, it’s Mark Puig (Executive Chairman) and his cousin Manuel Puig (Vice Chairman and Board Member).

Sources say that while William Lauder was a “yay” for the ELC/Puig SA merger, Jane Lauder was a “nay.” Likewise, Marc Puig and Manuel Puig were not in alignment. Marc, who ceded the CEO reins to long-time company man Jose Manuel Albesa earlier this year, was heavily involved in the 112-year-old company’s 2024 IPO and still very much steers the M&A ship. Marc was bullish on the deal with Lauder. Manuel Puig? Not so much.

If members of the same family can’t even internally agree on a deal of this magnitude, how can they possibly hope to represent their respective firms’ best interests in day-to-day dealings? So much would have to have been hammered out, from who would actually be in charge to voting rights.

Complicating matters is the history between Lauder and Puig. Leonard Lauder was quite publicly vocal about his admiration for the way Puig handled its business, and ELC tried to outright buy the company on several occasions. When a friendly takeover didn’t work, the two parties evidently concluded that establishing a U.S.- meets-Spain luxury powerhouse was the way to go.

Why It Sounded Promising on Paper

While Puig is currently winning the acquisition race by snapping up gems like makeup powerhouse Charlotte Tilbury, niche fragrance darling Byredo, and buzzy, if slightly controversial, skincare brand Dr. Sturm, Lauder has acquired a few duds it should most definitely shove out the door. These include makeup brand Too Faced, which it bought for $1.45B, and once-trendy “K-beauty” skincare range Dr. Jart+, which was part of a company called Have & Be that Lauder eventually ponied up north of $1B to acquire.

Lauder was more than happy at the idea of adding the successfully acquired Charlotte Tilbury and Byredo to its roster, as well as other top performers in the Puig portfolio, including fragrance superstars Carolina Herrera, Rabanne, and Jean Paul Gaultier, that promised to boost its bottom line.  

For Puig, it was all about acquiring global scale and infrastructure, as well as a massive leg up in the one category in which it isn’t particularly strong: skincare. With classic Estée Lauder, Clinique, and La Mer, ELC, after all these years, still utterly dominates department store skincare.

While 112-year-old Puig has actually been around longer than Lauder, which was established in 1946, the former is perceived by the beauty industry as having its finger on the trend pulse a little better than the latter. In short, there hasn’t been a single flop in Puig’s acquisition lineup. Conversely, Lauder has either shut down or resold three brands it once giddily snapped up: dermatologist skincare range Rodan + Fields, Canadian haircare line Ojon, and the once-beloved makeup brand Becca Cosmetics.

Wall Street Never Liked This Deal

When the proposed merger was publicly confirmed by both parties on March 23, Lauder shares dropped by roughly 7 percent, while Puig’s headed in the opposite direction, eventually rising almost 14 percent within 24 hours.

As soon as word got out on May 21 that talks had collapsed, Lauder shares leaped roughly 13 percent within 24 hours from $78.16 to $88.32. Conversely, Puig took a virtually opposite hit on the Madrid stock exchange, dropping a worrying 13+ percent, from €17.64 to €15.25.

Clearly, this was not a merger universally perceived by financial markets as beneficial for both companies. For Lauder, which is in the middle of a massive “Beauty Reimagined” turnaround under newish CEO Stéphane de la Faverie, the timing was considered particularly bad. The consensus among analysts: Restore some order to your balance sheet, stop the downward sales trajectory of the past several years, and then maybe consider a deal of this magnitude. In other words, get healthy again and then maybe think about becoming the next L’Oréal.