Financial audits and research on toy manufacturing companies: the new wave of adult collectors and the challenges of the counterfeit market
Toys adults buy for… adults – the new growth engine for the industry
The toy industry is undergoing a significant transformation. More and more adults are purchasing toys traditionally associated with children—such as teddy bears, dolls, collectible models, and most notably, sets of the world’s most popular building blocks (yes, the ones from Denmark). According to the latest U.S. market data, in the first quarter of 2024, adults over the age of 18 accounted for a greater share of toy sales volume than preschoolers for the first time—adults have become the most important customer group in the industry. As many as 43% of adults purchased a toy for themselves in the past year, driven by a desire to collect, nostalgia, and the need for entertainment and relaxation.
A prime example of spectacular success is LEGO®, which in 2024 recorded its highest-ever financial results. The company posted a 13% increase in revenue, significantly outperforming the overall toy market, thanks in part to adult-targeted lines such as LEGO Architecture, Technic, Botanicals, and sets inspired by pop culture and art. Adult collectors invest in limited editions, treat complex sets as a hobby, and in some cases, even as a form of investment.
The trendiest toys for adults – more than just building blocks
In addition to LEGO® sets, other products hugely popular among adults include:
- Collectible teddy bears and dolls—especially the world’s current best-seller and the most popular in Poland, La Bubu (figures from The Monsters series by Hong Kong artist Kasing Lung)
- Figures and models inspired by films, games, and pop culture
- High-difficulty board games and puzzles
- DIY sets for self-assembly or painting
Adults increasingly see toys as part of interior décor, a way to relieve stress, or a means of building fan communities around specific brands and series—complete with meetups and festivals.
The counterfeit market – a growing threat to manufacturers
Rising adult interest in toys has fueled the large-scale counterfeiting of popular products. In 2023, EU authorities seized a record 152 million counterfeit goods, many of which were toys, children’s games, and collectibles. These fakes often reach online marketplaces, are poorly made, fail to meet safety standards, and can pose hazards to users while damaging the reputation of original brands.
An example is the so-called knock-off phenomenon—products closely resembling originals, such as Chinese equivalents of LEGO® bricks, which infringe intellectual property rights and mislead consumers. In the case of iconic dolls like Barbie, counterfeits are often made from low-quality materials, risking a loss of trust in the brand.
The importance of audits in the new market reality
Given the fast-paced changes and rising counterfeit risks, financial, product, and trademark audits are becoming critical for toy companies. In particular, they:
- Protect revenue stability – Audits help identify sales irregularities, monitor distribution channels, and ensure that profits from popular products—especially those aimed at adult collectors—go to brand owners, not the gray market or counterfeiters.
- Verify compliance in licensing agreements – The growing number of licensing partnerships (e.g., with movie brands, games, or artists) demands precise oversight of financial flows. Audits ensure that licensees accurately account for royalties, license fees, and copyright payments.
- Ensure product compliance with safety standards – This is crucial in meeting the expectations of adult consumers, who demand top quality, durability, and authenticity in collectibles.
- Build investor and customer trust – Financial transparency and quality control enhance credibility. Adult collectors, who often invest significant sums in limited editions, expect confirmation of authenticity and legal sourcing.
- Support strategic decisions – Audits provide reliable data that help companies decide on launching new product lines, expanding into foreign markets, or developing direct-to-consumer sales.
In this new era of toys for adults—bringing in massive revenues but also serious risks (counterfeits, dishonest distributors, complex licensing)—audits are an essential part of protecting manufacturers’ interests and ensuring sustainable industry growth.
Audit recommendations for established and new toy market players
- Implement regular trademark and product audits—not only to protect the brand but also to respond quickly to counterfeit threats.
- Invest in innovation and dedicated adult product lines—this segment is growing faster than the children’s market, and adult buyers are more loyal and willing to purchase premium products.
- Increase control over the supply chain—supplier and logistics audits minimize the risk of unauthorized products entering the market.
- Build brand communities—adult collectors often act as brand ambassadors who can help combat counterfeits by reporting suspicious offers and promoting authenticity.
Financial audits and due diligence in M&A transactions in the toy industry
In the toy industry—where the market is rapidly evolving, and the adult toy segment is growing stronger—mergers and acquisitions (M&A) are becoming increasingly frequent and complex. In these processes, financial audits and due diligence play a key role, enabling investors and buyers to accurately assess the value and risks of target companies.
Due to the industry’s specifics, verification goes beyond standard financial aspects and includes detailed analysis of the product portfolio, intellectual property protection (including trademarks and industrial designs), and compliance with toy safety standards.
During financial due diligence, revenues, margins, production costs, as well as capital structure and liquidity are thoroughly analyzed. Particular attention is paid to sales seasonality, product life cycles, and risks related to the growing counterfeit market, which may affect future financial results. Auditors also examine internal control and risk management systems, which are essential in assessing a company’s stability and credibility.
In the M&A context, legal and technological audits are equally important. They include verifying trademark rights, licenses, and product certification status (e.g., CE mark for toys). This prevents the acquisition of a company with unresolved intellectual property issues or non-compliant products, which could lead to sanctions or product recalls.
Professional due diligence in the toy industry also involves analyzing the company’s growth potential, market position in the adult collectible segment, and threats from counterfeits and competitors. A comprehensive audit enables informed investment decisions, minimizes financial and reputational risks, and supports post-acquisition integration.
Summary
The toy market, traditionally associated with children, is now undergoing a major transformation—adult consumers are increasingly purchasing plush toys, dolls, building sets, and other products as collectibles, for relaxation, or as an expression of passion. This dynamic growth in the adult toy segment creates new opportunities for manufacturers but also brings challenges, particularly from the growing threat of counterfeits, which can severely damage reputation and financial performance.
In this changing market environment, regular financial, product, and trademark audits are crucial for protecting intellectual property, ensuring safety compliance, and building customer and investor trust. They are not only tools for defending against counterfeits and errors but also the foundation for safe, stable, and innovative growth in a sector gaining fresh momentum thanks to adult collectors. Solid financial and legal oversight is now the key to success and competitive advantage in the global toy market.
Toy companies and investors planning to enter this market should include financial audit and due diligence services in their business plans—only comprehensive financial and legal due diligence allows for an accurate assessment of value, risks, and growth potential, minimizing the risk of unforeseen problems after the transaction.
____
Does your company need a license audit, support in a toy market transaction, or assistance in identifying irregularities? Write to me!
Monika Tuzimek
Partner
