M&A in fashion & beauty — how the EU’s crackdown on burning stock is reshaping deals

From 19 July 2026, a critical phase of the EU’s Ecodesign for Sustainable Products Regulation (ESPR) takes effect, introducing a ban on destroying unsold consumer goods — initially limited to large companies and with a particular impact on those dealing in apparel, clothing accessories and footwear.

For years, the fashion and beauty industry’s treatment of unsold stock was an open secret, with businesses relying on destroying surplus stock to protect brand value, manage inventory and avoid discounting. 

High-profile cases — including Burberry’s disclosure that it had destroyed £28.6m of unsold clothing, accessories and perfume in 2017 alone and scrutiny of fast-fashion and high-volume retailers such as H&M — brought these practices into the spotlight and intensified public and regulatory pressure.

With the destruction ban now approaching, these historic practices and regulatory shifts are becoming a material focus in mergers and acquisitions (M&A) due diligence and deal structuring.

Here, corporate transactions specialist Megan Colvin from our retail sector team explores the ESPR’s implications for M&A in the fashion and beauty industry and outlines what businesses should be doing in response.

What is the ESPR?

The European Union implemented the ESPR with the aim of addressing environmental and product sustainability issues more broadly. The ESPR looks to impose regulatory obligations on businesses in various industries, requiring products to be more durable, repairable, recyclable and resource-efficient and for businesses to be more transparent with lifecycle data. 

For the fashion industry in particular, the ESPR has resulted in the phased implementation of disclosure obligations, supply-chain transparency requirements (i.e. Digital Product Passports) and a ban on the destruction of unsold goods.

The ban on destroying unsold stock

Large companies (as defined in the ESPR) have faced disclosure obligations since 2025 — but from 19 July 2026, they’ll also face a ban on the destruction of unsold apparel, clothing accessories and footwear, with medium-sized companies to follow in 2030. Destruction of goods will only be permitted in limited circumstances (for example, where products are unsafe or can’t be reused or recycled).

Why UK businesses are still affected

While the ESPR isn’t currently implemented in UK legislation, it has direct consequences for many UK‑based fashion and beauty brands that sell into — or otherwise operate within — the EU market. The implications of the regulations increasingly arise in corporate M&A transactions, particularly in circumstances where (but not limited to) EU revenues are material, the buyer is an EU-based group or the buyer intends to scale EU sales post-completion. 

What M&A buyers are now looking for

From an M&A buyer’s perspective, the focus is less on whether UK law applies and more on where the commercial risk sits. 

Key due diligence questions that should be asked may therefore include whether:

• The target business is exposed to ESPR obligations.
• Historic stock disposal practices align with public sustainability messaging.
• Future compliance will require operational or financial change.

Increasingly, buyers expect these issues to have been identified and considered by the seller ahead of a transaction, rather than arising for the first time during due diligence. Sellers are therefore expected to have a clear understanding of their position, including how and where goods are placed on the EU market and how surplus stock is managed in practice. Addressing potential gaps early can reduce the need for extensive disclosure and limit the scope of warranties and indemnity protection sought by buyers.

How ESPR issues can influence deal structure

Where issues are identified in due diligence, they can also influence deal structure. In a share sale, the buyer will inherit historic stock handling practices, disclosure and reporting obligations in the EU — and potentially reputational and regulatory exposure. 

As a result, where stock management has historically relied on destruction, the buyer may:

• Seek enhanced warranties or disclosures.
• Push risk onto the sellers via indemnities.
• Favour asset purchases to ring-fence liabilities.

What sellers should be doing now

If you’re looking to sell your fashion or beauty business, it’s important to understand whether and how the business places goods on the EU market, how surplus stock is handled and whether alternative routes (resale, donation or recycling partners) are — or should be — in place. Addressing these issues early helps to preserve optionality, strengthens your position in negotiations and reduces the risk of price adjustments or structural changes later in the process. 

While the ESPR is an EU regulation, UK‑based businesses with EU exposure can’t treat it as peripheral. Early identification and management of these risks is key to delivering regulatory compliance and increasingly important for a smooth and successful exit.

Talk to us

As one of the UK’s most active legal teams for M&A activity, we support the fashion and beauty industry in understanding your regulatory exposure, preparing for buyer expectations and positioning your business strongly for investment, growth or exit.

As a certified B Corp, we champion responsible, transparent and sustainable business practices — and bring that same approach to every transaction.

To discuss how we can support you, call 0333 004 4488, email hello@brabners.com or fill in our contact form.