How Can Luxury Brand Equity Assessment Brand Equity During M&A Due Diligence?

India’s luxury goods market, valued at $8–9 billion with a 10–12% CAGR, spans fashion, fine jewellery, watches, luxury automobiles, beauty, fragrances, gourmet foods, private aviation, and real estate, fueling robust Luxury M&A activity. Brand equity assessment is a critical component of due diligence, enabling buyers and sellers to quantify intangible value and justify valuations. The complex value chain from global luxury houses to authorised distributors, mono-brand boutiques, multi-brand outlets, e-commerce, personal stylists, logistics, and regulators (DGFT, BIS, Customs, RBI) demands rigorous brand equity assessment to ensure deal success. Market forces like rising ultra-high-net-worth individuals (UHNIs), Tier-2 expansion, digitised luxury experiences, and Gen Z influence amplify the need for precise brand equity assessment in Luxury M&A. This article, crafted for senior leaders, explores how to assess brand equity during due diligence to achieve fair valuations.

The Role of Brand Equity Assessment in Luxury M&A

Brand equity assessment is pivotal in Luxury M&A, as luxury valuations rely heavily on intangibles like heritage, cultural resonance, and consumer perception. Unlike traditional industries, where tangible assets dominate, luxury brands derive significant brand value from emotional and cultural appeal, making brand equity assessment essential for due diligence. Strategic acquirers, private equity (PE) firms, and family offices use brand equity assessment to validate valuation claims, ensuring alignment between seller aspirations and buyer expectations. A robust brand equity assessment mitigates risks and builds confidence in Luxury M&A deals.

1. Recent Developments of Brand Equity Assessment (2025)

• Several trends shape brand equity assessment in Luxury M&A:

1. Customs Duty Revisions: May 2025 duty cuts on fashion and watches via the EU trade pact enhance deal attractiveness, requiring brand equity assessment to verify margin sustainability.
2. Luxury Mall Boom: FY26 luxury mall launches in Delhi NCR, Mumbai, and Bengaluru signal retail growth, necessitating brand equity assessment for market penetration potential.
3. UHNI/NRI Wealth Growth: Rising UHNI wealth and NRI investments in collectible assets demand brand equity assessments to evaluate consumer spending trends.
4. Digitisation Surge: .in flagship sites with AR/VR and concierge logistics strengthen digital brand equity, requiring due diligence on tech capabilities.
5. ESG Focus: BIS traceability mandates for diamonds, leather, and precious goods elevate brand equity assessments for sustainability reputation.
6. Budget 2025 Updates: Changes to luxury tax, GST, import norms, and RBI rules require due diligence to ensure compliance and protect brand equity.

2. Key Challenges & Nuances

• Luxury brands face significant challenges in brand equity assessments during Luxury M&A:

1. Grey Market Pressure: Unofficial channels erode pricing power, complicating brand equity assessments and valuation.
2. Regulatory Burdens: Compliance with BIS hallmarking, GST, and import regulations requires thorough due diligence to safeguard brand equity.
3. Inconsistent Tier-2 Infrastructure: Uneven retail and logistics infrastructure in Tier-2 cities challenges scalability assessments.
4. Digital Gaps: Gaps in global-standard digital platforms hinder accurate brand equity assessments for online performance.
5. Localized Content: Lack of India-specific content, collections, or customer service impacts brand equity and regional appeal.

3. Strategic Implications Using Hybrid Consulting Lens

A multidisciplinary approach ensures robust brand equity assessments in Luxury M&A:

• GTM / Market Entry Strategy

1. India-Specific SKUs: Develop localised products and campaigns to enhance brand equity and demonstrate market fit.
2. Digital Storytelling: Leverage heritage narratives and celebrity endorsements to boost brand equity in due diligence.

• M&A / Investment Strategy

1. Comprehensive Brand Equity Assessments: Evaluate intangible levers like heritage narrative, digital following, and luxury perception to justify valuations.
2. Financial Mapping: Align brand equity with financial metrics like customer lifetime value (LTV) and net promoter score (NPS) to support due diligence.
3. Influencer Alignment: Quantify influencer impact and cultural cachet to strengthen brand equity assessments.

• Due Diligence Deep Dive

1. IP Audits: Conduct forensic audits of logos, trademarks, and trade dress to validate brand equity during due diligence.
2. Consumer Sentiment: Use social listening and luxury sentiment indices to quantify brand perception.
3. Brand Recall Benchmarks: Compare digital traffic share and recall metrics against competitors to assess brand equity.
4. Royalty Relief Method: Apply the royalty relief method to estimate brand equity for valuation in Luxury M&A.
5. ESG Reputation: Evaluate sustainability credentials among UHNIs to enhance brand equity assessments.

• Legal & Regulatory Strategy

1. IP Ownership: Review IP rights, past litigations, and BIS compliance to protect brand equity in due diligence.
2. FEMA Compliance: Ensure cross-border asset compliance to avoid valuation risks.

• Tech & Innovation Lens

1. AI Benchmarking: Use AI to benchmark brand visibility and loyalty across touchpoints, supporting brand equity assessments.
2. Blockchain Provenance: Deploy blockchain to verify product authenticity, enhancing brand equity in due diligence.

• Turnaround or Value-Addition Levers

1. Brand Repositioning: Use brand equity assessments insights to reposition stagnant brands post-acquisition.
2. Omnichannel CRM: Implement D2C models and CRM systems to expand brand equity and market reach.

Illustrative Examples

• AI Sentiment Driving Valuation

A European luxury watchmaker conducted a brand equity assessment during a luxury M&A deal. It used AI-driven sentiment tracking to justify a valuation premium. Strong engagement from urban Gen Z and high digital brand equity validated the brand’s appeal. These factors secured a successful acquisition through robust due diligence.

• IP and ESG Validation

An Indian luxury textile house validated its premium valuation through a comprehensive brand equity assessments in a Luxury M&A buyout. Third-party IP valuation, digital customer sentiment scores, and ESG certifications for sustainable sourcing demonstrated robust brand equity, resulting in a 20% valuation premium.

Conclusion

Brand equity assessment is a strategic imperative in Luxury M&A, enabling luxury brands to quantify intangible value and justify valuations during due diligence. By leveraging a hybrid consulting approach spanning market strategy, financial mapping, legal compliance, and technology brands can address challenges like grey markets and regulatory burdens. With India’s luxury market growing at 10–12% CAGR, robust brand equity assessment ensures fair valuations and successful, brand-aligned Luxury M&A outcomes.

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