Tony Wales: AOL Europe

The multiplicity of issues arising out of the sell-off of part of AOL Europe’s business last year ensured general counsel Tony Wales and his team were kept on their toes. By Matt Byrne

If there is one message that AOL Europe general counsel Tony Wales is determined to communicate, it is that he still exists. Or rather, his company and his legal team does.

Contrary to public perception, AOL Europe was not sold off late last year. Only part of it was.

“We sold the access part of the business last year to concentrate solely on what we call ‘audience’,” says Wales.

That single sentence barely does justice to what was, by all accounts, a terrifically complicated deal, which demanded a tremendous amount of effort on the part of Wales’ in-house team and his external lawyers Herbert Smith.

The usual pressures on any team of in-house lawyers arising out of a major multijurisdictional sale were compounded in this case because it was a deal that would result in the exit of at least half of Wales’ legal team post-completion. The new in-house team at AOL Europe is around half the size of its previous 23-lawyer incarnation, a reflection of the slicing in two of the business.

“We had to make some tough calls,” admits Wales. “This deal was genuinely handled by the in-house team, including half the guys who were sitting on a branch of a tree, sawing.”

At the beginning of 2006 AOL Europe’s legal team had lawyers in London, Paris, Hamburg and Luxembourg serving a business focused on three jurisdictions, namely the UK, Germany and France.

A strategic review in the early part of last year led to a decision by AOL to split the company in two. The access half was to be sold, while the remaining web content and online services business would be expanded through strategic partnerships with the purchasers of the access half of the business.

“AOL Europe had moved from a business that made a $660m [£465m] loss in 2001 to around $100m [£54.95m] in profit in 2005,” says Wales. “But the market was changing, with telcos for example offering broadband access to sell other services, such as telephony and TV. Companies were looking for scale and it was clear that, if we were going to sell, we had to sell now.”

The sale of AOL Europe’s access business in the UK, Germany and France, which completed in February this year, realised $1.96bn (£978.26m) in total.

Three five-year partnerships were struck with Carphone Warehouse in the UK, Telecom Italia in Germany and Neuf Cegetel in France. As a result of the deals, AOL Europe was able to expand the number of customers who receive its online services and content from around six million to almost 10 million.

It is obvious from the moment one meets Wales that he is steeped in the commercial realities of life at AOL Europe. He barely mentions legal matters at the start of the interview, but enthuses about the raft of new web content, products and services his company is looking to launch, such as music site AOL Sessions, finance site AOL Money and Show Me, AOL’s new user-generated video site.

“All of our lawyers are completely embedded in the corporate strategy,” says Wales. “Legal’s completely embedded in strategic thinking.”

Wales eventually allows himself to be steered onto legal and contractual matters relating to the partial sale and AOL Europe’s position going forward. Although there is no doubt this commerciality and enthusiasm for the company’s products permeates Wales’ entire team, ultimately the 11 members of his team are lawyers. And on the AOL Europe sale there was a great deal of legal skill required.

“Originally we had one contract for all of our consumers,” explains Wales. “This had to be split in two and the contracts of almost six million subscribers across Europe had to be amended.”

The legal task was to devise a way of separating the contract into two parts, one for the provision of access and the other for the supply of content and online services. The access contracts then had to be repackaged into new commercial vehicles for sale to third-party access providers, taking into account the variety of multijurisdictional consumer law and data protection issues.

This complex task, which had to be conducted over three jurisdictions, was only part of the work facing Wales’ team. On top of this consumer-facing issue, the lawyers also had to wrestle with the corporate restructuring of AOL Europe, an issue that raised major employment law matters across the three jurisdictions, while also negotiating the simultaneous five-year partnerships with the three separate purchasers. And all the while the team continued to support AOL Europe’s existing business.

Nick Elverston, the Herbert Smith partner who worked with Wales’ team on the project, says: “This was an exhilarating transaction to be involved with. It represents a bucking for the current convergence trend, with AOL focusing its activities on its audience business.”

Wales says: “It was absolutely unprecedented. Lots of people said we’d never do it.”

His team’s continued existence is testament to the fact that it did.
Tony Wales
General Counsel
AOL Europe

Organisation: AOL Europe
Sector: Media and technology
Number of employees: 600
General counsel: Tony Wales

Reporting to: CEO, AOL Europe Dana Dunne and Global GC, AOL LLC Ira Parker
Legal capability: Nine in London, three in Paris, three in Hamburg and one in Luxembourg
Main law firms: Clifford Chance, Herbert Smith, K&L Gates, Pinsent Masons
Tony Wales’ CV

1975 – Worcester College, Oxford University;
1979 – College of Law, Lancaster Gate
Work History:
1981 – corporate/ commercial assistant, Turner Kenneth Brown;
1986 – managing partner, Turner Kenneth Brown, Hong Kong;
1991 – international partner, Turner Kenneth Brown, London;
1994 – group head of legal, The Economist Group;
2002 – general counsel, AOL Europe