How Pearson’s in-house lawyers steered £1bn FT sale

The billion-pound sale of both the Financial Times (FT) and The Economist has kept the group busy, plus there has been the added headache of simultaneaously running a global panel review of its external law firms. 

The sales were overseen by deputy general counsel for finance Graeme Baldwin, at a time when both the company and its legal team were going through a complete reorganisation. 

“Both education and news media are being revolutionised by digital technology,” Baldwin says. “The global reorganisation of Pearson means we will be able instead to focus specifically on education, while news channels such as Nikkei are better placed to meet these media challenges.” 

The £844m FT sale to Japanese buyer Nikkei involved a small in-house team of just Baldwin and one senior M&A legal counsel Holly Kinchin-Smith. Kinchin-Smith joined in May at the same time as Herbert Smith Freehills (HSF) senior associate Nancy Roberts, who worked separately on the Economist sale around a month later.

“We were lucky to have Nancy and Holly,” adds Baldwin. “It was great for them to come in with these transactions and was quite the introduction for them. It was a fortunate coming together of everyone.” 

Both had links to the external firms used on each deal, with Kinchin-Smith having previously worked at Freshfields Bruckhaus Deringer.

While Freshfields partners Simon Marchant and Ollie Lazenby acted as the main adviser on both transactions, HSF worked on real estate aspects of the FT deal under lead partner Alice Dockar. Morgan Lewis & Bockius partner Rob Dickey provided US legal advice, with Holland & Knight partner Michael Kuppersmith advising on additional real estate aspects. 

“In the FT deal, there was certainly overall more work involved and it was intense,” Baldwin recollects. “It involved a greater number of people and had a larger due diligence process, with pensions aspects also having to be looked at to ensure all parties were comfortable with the decision.” 

However, both transactions brought with them numerous challenges, particularly owing to their cross-border nature. Pearson chose to sell its stake in the Economist for £469m to Italian investment company Exor, meaning both in-house teams had to deal with conflicting timezones and regulatory regimes, particularly on the antitrust side. 

Despite this, Baldwin says it was beneficial that the buyers both engaged practical advisers in London making key legal discussions much easier. City partners from Macfarlanes and Linklaters advised Exor and the Economist respectively, while Skadden Arps Slate Meagher & Flom and Travers Smith both fielded London teams for Nikkei. 

“We were helped by the counterparties who were well aware of their strategic opportunities in the deal,” says Baldwin. “Exor, for instance, was already a shareholder in The Economist, and both it and Nikkei were complemented by their legal advisers.” 

Although the deals were not inter-conditional and did not depend on the success of the other, they both demonstrate Pearson’s emphasis on education and a move away from news media. This change in focus could be reflected in Pearson’s upcoming panel review, which general counsel Bjarne Tellmann is expected to finish in the coming weeks.