In a dramatic end to months of speculation, Estée Lauder has officially terminated high-stakes merger talks with Spanish rival Puig, killing what would have created one of the world’s largest fashion and beauty conglomerates worth nearly $40 billion.

The cosmetics giant confirmed Thursday that the parties have ended discussions regarding a potential business combination after failing to agree on key structural terms.

Sources close to the negotiations point to a major roadblock involving British beauty entrepreneur Charlotte Tilbury. Puig holds a majority stake in her fast-growing brand, and the proposed deal would have triggered a change-of-control clause, potentially allowing Tilbury to cash out her remaining minority stake at a significant premium.

Estée Lauder CEO Stéphane de La Faverie said the company is “reiterating our confidence in the power of our incredible brands, our talented teams, and our strength as a standalone company.”

This collapsed mega-deal highlights just how complicated it can be when two fiercely independent, family-controlled beauty empires try to join forces. Estée Lauder, with iconic names like Clinique, Bobbi Brown, and Tom Ford Beauty, and Puig, owner of Jean Paul Gaultier, Carolina Herrera, and Dries van Noten, each brought enormous brand power to the table — but also complex founder stakes and family legacies.

Investors seemed to breathe a sigh of relief. Estée Lauder shares jumped sharply in after-hours trading, while Puig shares, which had surged on merger hopes, dropped nearly 15%.

For Charlotte Tilbury — who built her brand from scratch and topped Britain’s beauty rich list — the failed merger may preserve her influence and financial upside longer than expected.

Both companies now say they will continue pursuing growth on their own terms. But the episode raises questions about whether the beauty industry is heading toward further consolidation or if strong-willed founders and family dynasties will keep these giants operating independently.