In the world of Luxury, Fashion, and Cosmetics, a company’s value does not lie solely in its inventory or factories, but in its imagination—its brand image. Based on the analysis of our assignments conducted between 2017 and 2025, this sector represents our third major area of expertise.
Unlike Tech, where code is valued, or Biotech, where patents are central, here the focus is on valuing desire. How can the aura of a brand or the secrecy of a formula be translated into millions of euros? The following outlines the trends and methodologies observed in practice.
1. The Brand: The Ultimate Asset and the Relief from Royalty Method
Unsurprisingly, brand valuation is at the core of this sector. Our experts primarily use the Relief from Royalty method. The principle is to estimate what the company saves by owning its brand rather than paying a licensing fee to a third party.
- Calibrating royalty rates: The key challenge is determining the “right rate.” In the luxury segment, including perfumes and even music-related branding, our assignments have involved validating royalty rates typically ranging from 2% to 5%, depending on whether the products are physical goods or musical compilations, by benchmarking against market practices.
- Brand strength: For a footwear brand, valuation exceeded €6.5 million, supported by ambitious revenue targets in the premium segment.
- Circular economy: The sector is evolving. The valuation of a brand in the refurbishment sector, between €9 million and €12.4 million, demonstrates that second-hand and refurbished goods are now developing brand power nearly comparable to traditional luxury.
2. The “Trade Secret”: Valuing Formulas and Know-How
In cosmetics, the brand alone is not sufficient. The “recipe” is an industrial asset that can be highly valuable. Our assignments highlight the importance of separating brand value from technical know-how.
- Separating assets: For a cosmetics group, we valued a young brand independently, estimated at around €5 million, and its portfolio of formulas and R&D know-how, also exceeding €5 million. This separation allows development costs to be capitalized on the balance sheet of the subsidiary dedicated to exploitation, or to justify valuation levels during fundraising.
- Innovation bundle: In the context of an innovative project for a major cosmetics group, the assignment involved valuing a complete “package” transferred to a subsidiary, including patents, base formulas, marketing mix, and development strategy. For these “soft” intangible assets, the reconstruction cost method is often used to establish a floor value based on actual investments.
3. Distribution Network: An Invisible Asset
A distinctive feature of this sector, observed in our cases, is the valuation of sales channels. A brand only has value if it is distributed.
- Distribution agreements: For an organic cosmetics brand, we assessed the value of distribution agreements in bare ownership within intra-group transfers.
- International expansion: Value can be geographic. A specific assignment involved valuing intangible assets related to a brand in Japan, particularly its retail network, demonstrating that location and commercial leases are key components of retail valuation.
4. Fashion Tech: The Emergence of DCF in Fashion
The sector is not immune to technological disruption. For emerging “Fashion Tech” companies, traditional asset-based methods are giving way to future cash flow methods such as DCF, typical of startups.
- Example of two U.S. startups: For these innovative companies, specializing in adaptive clothing and zero-waste design, within an investment fund portfolio, valuation is based on future growth potential, reaching several million dollars despite their early stage.
- Example of a more mature startup: A patented wearable technology, connected safety jewelry, has been valued at up to $80 million, demonstrating that when fashion meets technology, valuation multiples increase significantly.
Conclusion
Valuing a luxury or cosmetics company requires precision. It involves balancing the rigor of historical costs for formulas, projecting future cash flows for Fashion Tech companies, and conducting market analysis to justify royalty rates for major brands. This tailored approach is what enables the transformation of image into financial capital.
