Aliyah Walker
Staff Editor, Delaware Journal of Corporate Law, Volume 50
Introduction
L’Oréal, Estee Lauder and e.l.f. are all common make up brands which can be found at your local stores. However, they have much more in common outside of their placement on the shelves. Many of these major businesses have developed strategies to expand their market presence, enhance product innovation, and streamline operations. At the heart of developing a company is a strong board of directors and innovators who can see business potential beyond measures. Merging and acquiring other businesses has allowed leading companies like L’Oréal to strengthen their brand identity, consumer satisfaction, and keep up with industry trends. This blog will discuss how L’Oréal, a leading beauty brand, has strategically developed and how Delaware Law may inform these sorts of expansions in the future.
L’Oréal: Revolutionary Beauty Business Model
L’Oréal was founded in July of 1909, by chemist Eugene Schueller.[1] Since its original product of hair dye, the business has expanded to manufacture a multitude of products including skin care, hair care, hair color, and make up products.[2] L’Oréal has become a best seller in the beauty industry by understanding business trends from old school advertising to today’s influencer driven marketing practices.[3] Today, you can locate a L’Oréal product in almost every grocery store, pharmacy, or supermarket. Its continued expansion within the beauty industry will continue to impact the business world. L’Oréal’s mission hinges on being innovative and providing developmental products that uniquely serve consumers. [4] L’Oréal has continued to prioritize these values over the years of expansion and growth.
To further its mission of innovation, L’Oréal has merged with, and acquired several companies, including but not limited to Lancôme, Garnier, La Roche-Posay, Yves Saint Laurent Beauté, NYX, and Armani Beauté among many others.[5] In one of its biggest merger deals L’Oréal acquired Aesop, an Australian luxury beauty brand for $2.5 billion in 2023.[6] L’Oréal has seen significant success but has experienced some challenges relating to global regulatory standards and multi-district litigation claims involving products alleged to cause cancer.[7] Despite this, L’Oréal remains a key player in the beauty industry.[8] L’Oréal has joined forces with many companies but has not always sought representation on these boards.[9] These decisions and the above-mentioned potential concerns may become points of contention for the company in the future, with Delaware Law possibly providing a legal framework for some of these concerns.
Stakeholder Interests and Appraisal Rights
Delaware Law is well-settled on issues regarding the merging of companies in the ever-changing marketplace.[10] Delaware law provides a framework to create and maintain balance between stockholder interests and fairness in these major transactions.[11] Delaware law seeks to maintain balance within corporate structures, addressing issues such as fiduciary duties, dilution claims, and stockholder appraisal rights.[12]
While mergers and acquisitions create several avenues for growth in business, they also carry the risk that shareholders may find such changes to be unfavorable, prompting a claim of dilution.[13] Delaware has addressed dilution claims within the corporate realm determining that they can be both direct and derivative but are often deemed derivative, as the harm is to the corporation itself.[14] These claims are not personal to stockholders but arise from the stockholder’s relationships with one another, with stock, and with the company.[15] To further understand stockholder appraisal rights, we look to Title 8 of the Delaware Code § 262.[16] Shareholders may seek a determination of the fair value of their shares as long as the shareholder can satisfy a number of statutory requirements.[17] Valuation must not be based on speculative elements of future value and the valuation should consider provable elements of future value.[18] Courts have faced procedural issues in this evaluation process and in determining the appropriate remedy to such an issue.[19]
Stockholder Representation
Similarly vital to the success of merger transactions and to business development is stockholder representation. In Delaware, stockholder representation is governed by Delaware General Corporation Law “DGCL”; its provisions provide flexibility to allow governance within stockholder agreements.[20] The provisions of any stockholder agreement must align with the statutory rights designated by DGCL.[21] Delaware Law has sought to protect directors’ rights, this is examined in a Court of Chancery case Seavitt v. N-Able Inc., where the court determined that pre-approval requirements in a stockholder agreement violated the director’s governance authority.[22] Each of the tools Delaware courts have utilized have and will continue to shape how large corporations exist and grow in the business world.
Conclusion
As L’Oréal continues to expand, it will be important that it maintains a business structure which aligns with its longstanding values but also seeks to protect shareholder interests and rights. Delaware law provides clear guidance to protect shareholders as provided in DGCL and through case law. L’Oréal may continue to face several challenges particularly relating to consumer preferences, international expansion, and sustainability practices. Given L’Oréal’s strong history of expansion it will continue to thrive through these challenges, especially considering its recognition for being ethical and sustainable which is a key consideration for successful brands today.
About the Author
Aliyah is a third-year law student at Widener University Delaware School of Law. Aliyah is a Staff Editor for Volume 50 Delaware Journal of Corporate Law. Aliyah graduated from Dickinson College in 2020 with a degree in Psychology. She is originally from south Philadelphia but has lived in London, Baltimore, New Orleans, and Washington, D.C. Her vast experiences and upbringing shaped her desire to pursue a career in law.
While in law school Aliyah currently works as a law clerk at Doroshow, Pasquale, Krawitz and Bhaya. Aliyah previously ran a small business selling natural water-based beauty products. Aliyah hopes to eventually combine her entrepreneurial experience and appreciation for the beauty industry with her legal career. Following graduation, Aliyah will be returning to Maryland to clerk in the Baltimore County Circuit Court.
[1] Our History: The Adventure of Beauty, L’Oréal, https://www.loreal.com/en/group/culture-and-heritage/l-oreal-history/ (last visited Apr. 10, 2025).
[2] Id.
[3] Brand Minds, How L’Oréal Became the Leading Brand in Beauty, LinkedIn (Feb. 23, 2023) https://www.linkedin.com/pulse/how-lor%C3%A9al-became-leading-brand-beauty-brandminds/.
[4] L’Oréal 2023 Annual Report, L’Oréal, https://www.loreal-finance.com/en/annual-report-2023/strategy/ (last visited Apr. 10, 2025).
[5] Id.
[6] Id.
[7] Leahanna Sine, L’Oréal’s Dilemma: Aligning Beauty Trends with Ethical Goals, 13 J. Glob. Bus. & Cmty. (July 29, 2022); Nyima Jobe, L’Oréal Faces Six Lawsuits over Benzene Contamination in Acne Treatments, Cosmetics Bus. (Jan. 8, 2025), https://cosmeticsbusiness.com/l-or%C3%A9al-faces-six-lawsuits-over-benzene-contamination-in-acne%20treatments.
[8] Brand Minds, supra note 3.
[9] L’Oréal to Acquire 10% Stake in Swiss Skin Care Company Galderma, Reuters (Aug. 5, 2024), https://www.businessoffashion.com/news/beauty/loreal-to-acquire-10-stake-in-swiss-skin-care-company-galderma/#:~:text=L’Or%C3%A9al%20said%20it%20will,days%2C%20the%20French%20company%20said.
[10] Del. Code Ann., tit. 8, §§ 257–258 (2024); Del. Code Ann., tit. 6, § 17-211 (2024).
[11] Tit. 8 §§ 257–58.
[12] Id. § 262; see Manti Holdings, LLC v. Carlyl Grp. Inc., No. 2020-0657, 2022 WL 1815759, at *17–19 (Del. Ch. June 3, 2022).
[13] See Feldman v. Cutaia, 951 A.2d 727, 728 (Del. 2007).
[14] Brookfield Asset Mgmt. v. Rosson, 261 A.3d 1251, 1262–63 (Del. 2021).
[15] See Urdan v. WR Capital Partners, LLC, 244 A.3d 668, 676 (Del. 2020).
[16] Tit. 8, § 262.
[17] Id.
[18] Montgomery Cellular Holding Co. v. Dobler, 880 A.2d 206, 222 (Del. 2005).
[19] See Firefighters Pension Sys. v Found Bldg. Materials, Inc., 318 A.3d 1105 (Del. Ch. 2024).
[20] Tit. 8, § 141.
[21] Id.
[22] Seavitt v. N-Able, Inc., 321 A.3d 516, 540–41 (Del. Ch. 2024).
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