PARIS — PPR and Groupe Clarins. Coty and Del Laboratories. Speculative reports have been rife that such companies are involved in M&A activities.

This story first appeared in the December 7, 2007 issue of WWD. Subscribe Today.

The pairing of such names — and more — will probably ramp up in the near term. And it won’t all be buzz, said industry sources, who believe numerous beauty deals could be sealed in the months to come.

“There are midsized companies that will either decide to sell themselves or make acquisitions to reach a critical size to remain competitive,” said Karine Ohana, partner in Ohana & Co., a boutique M&A firm in Paris. When it comes to fragrance manufacturers, critical mass is key to building muscle needed to negotiate with retailers and for advertising’s sake, she explained. For cosmetics makers, it also concerns strengthening research and development.

“Companies might make acquisitions to gain either route to market, period, or to enter into emerging markets,” said one industry source who requested anonymity. He explained another driver of M&A activity could be the need for companies to keep their numbers up in the event of an economic slowdown.

Further, financial sources say they expect more private equity firms, particularly smaller funds, to attempt to unload their investments, given lack of liquidity in the credit markets, and that the potential onslaught of firms on the selling block will begin to drive prices down.

Meantime, the Courtin-Clarins family — with 65.1 percent of Clarins’ capital and 78.6 percent of its voting rights — has repeatedly said the company is not for sale, despite rumors to the contrary. Just last week, Christian Courtin-Clarins, president and chief executive officer of the firm, issued a statement (in response to speculative reports that Clarins has entered into negotiations with PPR) that said: “To this date there exists no element of a nature to be made public.”

According to some speculative reports, PPR could offer its beauty division, YSL Beauté, to Clarins in return for up to a 30 percent stake in the company — and even a right of first refusal if the company is eventually sold.

In the months to come, Ohana believes beauty companies will continue searching for organic and natural brands to buy, as well as holdings to keep them competitive with pharmaceutical players.

Market watchers wonder whether L’Oréal might acquire Natura or Shiseido and if Procter & Gamble will snap up a skin care company. And that’s just to name a few M&A possibilities being bandied about.