Key legal considerations in influencer-driven mergers and acquisitions

In today’s business landscape, the emergence of influencers as the driving force behind brands has led to a shift in the traditional mergers and acquisitions (M&A) landscape. These transactions, known as influencer-driven M&A, are characterized by the significant value placed on the individual leading the business, their identity, intellectual property (IP), and commercial influence.

One of the core assets in influencer-led M&A deals is the influencer’s name, image, and likeness (NIL). These assets often take precedence over traditional trademarks and logos and are heavily negotiated during the deal-making process. Key considerations include the duration for which a buyer can utilize existing content featuring the influencer, expectations regarding continued brand promotion or provision of additional services by the influencer, as well as any restrictions on the influencer’s future ventures and endorsements. These terms not only shape the structure of the deal but also impact the long-term success of both the company and the influencer.

When conducting legal diligence in influencer-led deals, investors must go beyond standard due diligence to ensure that the IP associated with the brand is clean, enforceable, and free from unresolved conflicts. Resolved trademark conflicts or coexistence agreements can serve as indicators of a robust and scalable brand, instilling confidence in potential investors. Ownership and usage rights must be clearly defined to avoid any ambiguity that could potentially delay or jeopardize the deal, especially in cases where the brand’s identity is closely tied to the founder.

The involvement of influencers in brand deals can have a significant impact on valuation. Their cultural relevance, reach on social media platforms, and personal stories all contribute to the brand’s overall appeal, enhancing its value. However, this increased value also comes with inherent risks. To mitigate these risks, some investors opt to build portfolios of influencer-backed brands rather than relying on the reputation of a single individual. This diversified approach helps spread risk and ensures a more stable investment strategy, particularly in an industry where reliance on individual personalities can be volatile.

Overall, the legal considerations in influencer-driven M&A highlight the importance of carefully navigating the unique challenges presented by these types of transactions. As influencers continue to take on the role of brand-builders and founders, businesses and investors must be adept at managing the complexities of deals where individual identity and influence play a significant role in determining value and success. By addressing key legal considerations, conducting thorough IP diligence, and effectively managing valuation and risk, stakeholders can position themselves for success in this evolving business landscape.