What are the Challenges of Valuing Intangible Assets in Luxury M&A?

India’s luxury goods market, valued at ₹65,000–₹75,000 crore with a 10–12% CAGR, is a dynamic sector encompassing fashion, jewellery, real estate, beauty, and collectibles. As Luxury M&A gains traction in India and APAC, intangible assets brand equity, heritage, customer loyalty, design archives, intellectual property (IP), and artisanal reputation drive 60–70% of premium valuations. These non-physical assets, rooted in cultural storytelling and exclusivity, are the essence of luxury brands but pose significant valuation challenges. This article, crafted for senior leaders, explores these complexities and offers strategic insights for navigating high-stakes Luxury M&A.

The Role of Intangible Assets in India’s Luxury M&A Landscape

India’s luxury sector thrives on its rich heritage and growing affluent consumer base, attracting global conglomerates, private equity (PE) firms, and regional players. Intangible assets like brand equity and craftsmanship are central to deal premiums, often surpassing tangible assets like inventory. For example, a heritage jewellery brand’s value lies in its generational trust and design legacy, not just its gold reserves. Luxury M&A is fueled by cross-border deals, succession-driven exits by family-owned brands, and PE interest in scaling regional players. Regulatory easing, including 100% FDI in single-brand retail with heritage clause support, further accelerates this trend.

1. Recent Trends Shaping Luxury M&A of Intangible assets (2025)

• Several trends highlight the growing importance of intangible assets in Luxury M&A:

1. Heritage Brand Acquisitions: Global players acquire Indian brands to leverage cultural depth and localised identity, valuing intangible assets like handwoven design archives or GI-tagged weaves.
2. PE-Backed Roll-Ups: PE firms consolidate jewellery and fashion retail, focusing on intangible assets such as customer loyalty and D2C channel strength for value creation.
3. Regulatory Support: India’s relaxed FDI norms encourage foreign ownership, with deals structured around IP valuation and co-branding potential.
4. Technology Integration: CRM analytics and sentiment analysis tools assess intangible assets like customer lifetime value and brand reputation.

2. Challenges in Valuing Intangible Assets

Valuing intangible assets in Luxury M&A is complex due to their subjective nature. Key challenges include:

• Brand Equity Measurement

Brand equity, driven by consumer perception, legacy, and aspirational alignment, is hard to quantify. For instance, a heritage saree brand’s royal patronage history adds value, but translating this into financial terms is subjective.

• Customer Data and Loyalty

Legacy brands often lack structured CRM data, complicating forecasts of customer lifetime value. Inconsistent loyalty metrics can lead to misvaluation of this critical intangible asset.

• IP and Design Archives

Unregistered designs and artisanal techniques face legal protection gaps, while limited tech-enabled tracking in segments like handcrafted textiles hinders accurate IP valuation.

• Heritage and Craftsmanship

Generational trust and regional storytelling, such as those in Banarasi weaves, are difficult to assign monetary value, yet they are core intangible assets in luxury brands.

• Risk of Greenwashing

ESG-driven repositioning may inflate intangible asset value without substantiated impact, requiring scrutiny to avoid overvaluation.

• Cultural Fit Risks

Post-deal misalignment between acquirer and target values can erode intangible assets, such as when global processes dilute a brand’s artisanal identity.

3. Strategic Hybrid Consulting Analysis

A multidisciplinary approach combining finance, legal, technology, and cultural expertise is essential to address these challenges.

• Valuation Strategy

1. Blended Valuation: Combine income-based brand premium models, customer lifetime value, and historical IP monetisation potential. For example, a luxury watch brand’s valuation could include design patent royalties and retention rates.
2. Market Comps: Analyse past Luxury M&A deals with intangible-heavy structures (e.g., LVMH’s Tiffany acquisition) to benchmark brand equity premiums.

• Deal Structuring

1. Earn-Outs: Link payouts to brand loyalty KPIs, such as repeat purchase rates, to align incentives.
2. Royalty-Based Models: Use royalties to preserve founder identity and storytelling, safeguarding intangible assets.
3. Partial-Stake Deals: Include branding oversight or integration safeguards to protect cultural assets.

• Due Diligence Best Practices

1. Digital Presence Audit: Use sentiment analysis and influencer metrics to quantify brand reputation.
2. Legal IP Review: Scrutinise unregistered designs, GI tags, and heritage techniques to ensure legal protection.
3. ESG Validation: Verify sustainability claims through supply chain audits and community engagement data.

• Post-Merger Brand Strategy

1. Brand Stewardship Charter: Develop a charter to maintain intangible assets during integration.
2. Founder Retention: Retain founders or cultural custodians on advisory boards to preserve authenticity.
3. Balancing Exclusivity and Scale: Ensure financial discipline without compromising emotional capital or exclusivity.

Illustrative Case Studies

• Heritage Brand Acquisition

A Mumbai-based fine jewellery label, known for GI-tagged filigree work, was acquired by a GCC luxury conglomerate in 2024. Legal due diligence secured unregistered designs, while brand equity was valued using customer repeat data and influencer traction, with intangible assets driving 65% of the deal value. A 5-year royalty model for founder-designed collections ensured heritage continuity.

• Luxury Fashion Roll-Up

In 2025, a PE firm consolidated three regional fashion ateliers into a single luxury house. CRM analytics mapped customer lifetime value, and goodwill accounting supported a staggered buyout plan tied to post-merger brand growth benchmarks, with intangible assets like design archives driving 70% of the valuation.

Conclusion

Successful Luxury M&A in India’s vibrant luxury market requires robust frameworks for valuing intangible assets. By blending cultural fluency, financial discipline, legal protection, and technology tools, leaders can protect and scale brand equity, heritage, and customer loyalty. As India’s luxury sector grows at 10–12% CAGR, mastering these challenges will define the success of Luxury M&A in 2025 and beyond.

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