When he qualified at small commercial firm Prettys in Ipswich in 2008, Baker McKenzie’s Tom Edwards can scarcely have imagined the scale of the deal he’d be working on in the summer of 2020.
At the height of the pandemic last summer, Edwards was the lead associate on a deal which saw family-owned Barcelona-based fashion and beauty company Puig acquire luxury make-up and skincare brand Charlotte Tilbury.
Edwards began the deal as an associate and ended it as a partner. “That evening I was able to enjoy a glass of something nice in the garden before getting back to more deal calls!” he says. He had already completed most of the steps by the time the deal started, and was in what he describes as the “fingers crossed waiting stage” as he embarked on his last gargantuan deal as an associate.
Edwards joined Baker McKenzie in September 2008, a week or so after Lehman Brothers collapsed triggering the next phase of the global financial crisis. “It was an interesting first six months”, he says.
“Earlier in my career I worked on a broad range of deals as I’ve always thought generalist experience is a good thing. As I have become more senior, I have focused on the consumer and industrials sectors, which is where I do the majority of my work these days. I feel very fortunate to have the chance to work alongside a great group of clients and colleagues, who make almost all the deals I do enjoyable, and I have always tried to take something from each one.” Somewhat cryptically, he adds, “A particularly memorable one was missing my wife’s birthday to negotiate a deal in New York with my feet wrapped in burns dressings”.
The Puig deal, which signed and was announced on 4 June 2020 and closed on 23 June 2020, was one of the largest, most high profile and complex transactions to be completed during the Covid-19 lockdown.
Leading the deal alongside corporate partner David Scott, Edwards says it was among his favourites to date. “It was a terrific transaction, involving some complex structuring and issues and some pretty innovative solutions, with all parties very pleased by the outcome. It is another great example of Baker McKenzie’s work in advising on high profile and complex transactions in the consumer sector”. Edwards works closely with Scott across the consumer transactional practice in London and credits him with being “a great example of a modern law firm partner in action”.
The whole Bakers team of almost 150 fee-earners across 15 jurisdictions worked remotely – an arrangement that Edwards recalls had its trickier moments. “My family and I were in the process of moving when the pandemic struck in the UK and so we spent the first lockdown – and therefore the deal – camped at my in-laws’ house”, he says. “I was able to work from their attic room, but at 9pm each evening was asked to relocate to the kitchen table – to be shared with their cat – because the various late night calls on the deal were getting too noisy”.
The deal was entirely negotiated and completed under lockdown, including due diligence, management presentations, underwriting of a warranty and indemnity insurance policy, drafting, negotiations and electronic co-ordination of signing and completion. Project management tools and legal technology were used by the Baker McKenzie team to get the transaction over the line in the difficult remote working environment.
“I am always struck by the importance of being part of a great team, and I mean both with our clients and within Bakers, in getting these deals across the line successfully on short time frames and under pressure”, Edwards reflects. “Someone at Puig made a lovely comment after the deal had closed, ‘I simply believe that at the end of the day, more often than not, people make the difference…’ and I think that is true. I was very grateful to work with so many talented people pulling together across borders, time zones and practice areas to deliver the deal.”
“Everyone on the team plays a role in delivering a deal and we need to do what we can to make them feel valued and make sure they are okay. I co-head our mental health and wellbeing group in London and firmly believe that we can be successful transactional lawyers and still look after the wellbeing of our teams (and ourselves!). The importance of mental health and wellbeing is only going to increase over the coming years, particularly given the ongoing constraints of the pandemic”, he adds.
Baker McKenzie was sole legal advisor to Puig, a business it has a long-standing relationship with, and this was a deal in which Puig was up against global consumer giants, reportedly Unilever, L’Oreal, Estée Lauder and Shisedo, as well as financial bidders.
It was run as a highly competitive auction, arranged by Goldman Sachs and Jeffries for the target group. The deal had a significant UK nexus, with the target being headquartered in London, the UK being one of its main markets, the vast majority of its shareholder base being located there, and a raft of leading London advisory teams instructing on the transaction.
It was concluded under English law and was a milestone acquisition for Puig, turning it into a strong three-axis global competitor in the luxury beauty category.
The deal was conducted under a drag-along sale structure, with the target company having a large and disparate shareholder base, of upwards of 75 shareholders, many holding less than 1% of the equity.
Due to timing and confidentiality concerns, the principal sellers did not want to approach all shareholders prior to signing of the deal or have them execute the agreement at signing. Instead, key sellers signed up to the sales and purchase agreement (SPA) at the point of signing, with the majority by number of the sellers adhering to the SPA between signing and completion.
This required extensive analysis of the robustness of the “drag-along” provisions available in the target’s constitutional documents and a coordinated shareholder engagement strategy. It is unusual for such a structure to be used on such a large and high-profile transaction.
The deal was won partly due to the inventive and forward-looking transaction structure, which maximised value and opportunity for all parties, and required complex shareholder and exit arrangements to be agreed on an expedited basis. The deal was structured as a strategic partnership which allowed Charlotte Tilbury herself, as founder, to roll over and retain a significant ownership interest in the business.
Reflecting on the structure of the deal, Edwards says, “While perhaps not a sticking point per se, on a deal such as this there is always a balance between negotiating the deal based on the value that is being paid, while recognising the importance of the founder, who is needed to continue to add the value on which that valuation is based. That can be a fine line and requires a collaborative, value-focused approach.”
Lady Demetra Pinsent also rolled over a portion of her equity, meaning that both the founder and CEO entered detailed arrangements to continue to run the business and drive its growth and development. This innovative structure was instrumental in securing the deal, as was building a strong relationship with the founder and her counsel throughout.
Moreover, due to the nature of the brands involved there was a complex intellectual property (IP) angle. On the acquisition of an eponymous brand such as Charlotte Tilbury, the IP arrangements – in particular the name and image rights of the founder, which stretch back over many years – are complex.
There also needed to be detailed arrangements negotiated for the retention of Tilbury and Pinsent going forward. In addition, an incentive plan for management going forward was put in place.
BDT Capital Partners invested alongside Puig on the deal via a preferred convertible equity instrument, requiring the Baker McKenzie team to negotiate the terms of the instrument and shareholder arrangements with BDT in parallel with negotiating the main transaction. In all, the Baker McKenzie team operated across the table from five other law firms simultaneously: Freshfields Bruckhaus Deringer for the target company, Davis Polk & Wardwell for BDT, Withers for Charlotte personally, Pinsent Masons for Pinsent personally and Bird & Bird providing personal IP advice to Tilbury.
Since closing this deal last year, Edwards and the team have seen a busy period. “Like most M&A practitioners we have had a very busy last twelve months and the Bakers corporate team is going from strength-to-strength at the moment. I’ve been working alongside our clients on a number of consumer and industrials deals, including Unilever Prestige’s recent acquisition of Paula’s Choice, the premium digital-led skincare brand”, he says.
Meanwhile, the pandemic provided some opportunities to develop new ways of working which Edwards says the firm is taking forward. “We were certainly much more conscious of the need for effective communication to get the deal done in the remote world. We spent a lot of time and effort trying to build rapport among the different stakeholders – from little things like always trying to keep cameras on when speaking to our counterparts, to strategising about how best to develop the relationship and create a good impression during the virtual management presentations and expert sessions (even if that meant less focus on technical content).”
About Tom Edwards
2020-present: Partner, Baker McKenzie
2008-2020: Associate, Baker McKenzie
2006-2008: Trainee solicitor, Prettys
Who’s Who: the Baker McKenzie corporate team
Leading: Partner David Scott and senior associate Tom Edwards.
Supported by: Corporate partners Alex Lewis and Jorge Adell, IP/tech partners Michelle Blunt and Carles Prat, employment partner Stephen Ratcliffe, tax partner Alistair Craig and competition Partner Valeria Enrich. The full Baker McKenzie team numbered nearly 150 fee-earners across 15 jurisdictions.