The news: Estée Lauder is in talks to acquire Puig, the company confirmed following an initial report in the Financial Times. If successful, the deal would create a beauty giant with a market capitalization of roughly $40 billion and a stable of prominent brands including Tom Ford, Charlotte Tilbury, Clinique, and Byredo.

The rationale: In theory, combining the two companies would create a more diversified business. Skincare, fragrances, and makeup and hair care would each account for roughly one-third of sales, according to a Jefferies analysis, which would make the company less vulnerable to weakness in any one sector.

• Estée Lauder currently derives around half of its sales from skincare, a category that is experiencing a global slowdown.
• Puig is heavily dependent on fragrance sales, which boomed during the pandemic but are now normalizing.

The deal would also make Estée Lauder a more formidable competitor to L’Oréal, although it would still be less than half the size in both sales and market capitalization. The purchase would better position Estée Lauder to compete with L’Oréal’s brands for shelf space at retail partners and potentially lend it more marketing muscle to support its labels.

The drawbacks: A merger between Estée Lauder and Puig could shake up the beauty industry, but it could also saddle Estée Lauder with more problems as it attempts to engineer a turnaround after several years of underperformance. While the company noted improvement in its most recent earnings, particularly in China, it continues to face tepid sales in the Americas, where it is struggling to win back lost market share. It is also rebalancing its channel mix to account for the decline of department stores and the growth of ecommerce channels like Amazon and TikTok Shop.

Acquiring Puig would burnish Estée Lauder’s premium positioning, but that could leave the company vulnerable as macroeconomic conditions push shoppers toward cheaper brands.

• Puig is a leading player in premium fragrance, but consumers are shifting to niche and mass brands: Mass market fragrance sales shot up 15% in 2025, compared with 5% growth for prestige brands, according to Circana.
• A similar trend in the skincare category could limit the upside potential for brands like Charlotte Tilbury and Barbara Sturm.
• Even luxury shoppers are rethinking beauty spending: Just 34.6% purchased prestige beauty or cosmetics products in the last year, according to an August survey conducted by Bizrate Insights for EMARKETER.

The implications: Given signs of normalization in the beauty sector, it’s no surprise that companies like Estée Lauder, L’Oréal, and e.l.f. Beauty are relying on acquisitions to juice growth. However, acquiring Puig may not be the best use of Estée Lauder’s resources. The sheer size of the combined company could make it difficult to keep pace with more nimble competitors, while the resources required to make the deal could eat into research and development budgets and hurt innovation.

Rather than pursuing a deal of this magnitude, Estée Lauder would be better served by following e.l.f.’s example and acquiring smaller, fast-growing brands that have a dedicated following among younger consumers and strong social media momentum.