Investment banks as matchmakers? Goldman Sachs Brings Esther Lauder to Tom Ford

Investment banks act as matchmakers? Goldman Sachs hands Esther Lauder over to Tom Ford投资银行充当媒人？高盛将Esther Lauder交给Tom FordAccording to WSJ, Estee Lauder is currently negotiating with Tom Ford. Although there are other potential sellers, Estee Lauder is undoubtedly the most concerned and competitive one. If this deal can be concluded, its expected amount will exceed 3 billion US dollars, which may become the largest M&A case in the history of Estee Lauder.

In the public's impression, in most M&A transactions, it is only after the two companies have reached a preliminary agreement that they can find an investment bank to start promoting the acquisition process. But in fact, since the company's willingness to acquire began, the work of the investment bank has begun - the seller's consultant should help the company that intends to sell find a buyer, and the buyer's consultant should help the company that intends to acquire to contact the seller.

Seller consultant: find the highest bidder

In this Tom Ford transaction, Goldman Sachs is the financial adviser hired by the seller. The most important responsibility is to find the buyer with the highest bid and successfully deal with it. You will be curious that different transaction amounts are different. This is not only the will of the seller's company, but also the choice of the investment bank from its own interests - the investment bank charges a certain proportion of commission according to the transaction amount, which is generally about 1-2%. That is to say, if Estee Lauder really buys Tom Ford for $3 billion, Goldman Sachs will probably make $30 million in this deal.

Buyers of M&A transactions are generally financial buyers and strategic buyers. Investment banks generally contact both types of buyers. Of course, all buyer choices need to be evaluated according to the needs of the seller.

Financial buyers: financial buyers in M&A transactions generally refer to financial institutions such as private equity (such as Blackstone). After holding the company's equity for a period of time, the financial buyer will withdraw and generally will not interfere with the company's business operation.

Strategic buyers: Strategic buyers are generally the same industry companies that sell the company. The main purpose of M&A is to integrate the upstream and downstream of the industrial chain or expand the product line. After the merger and acquisition, the two companies will take a long time to complete the integration, and will not be easily split again in a short time.

Generally, the seller will choose a company that is more experienced in its own field, not only because of its familiarity with business processes, but also because of the investment bank's contacts in the industry - the investment bank's contacts with potential buyers can help the deal go better and faster. In the cosmetics industry, Goldman Sachs has always had business contacts with many large groups, including Estee Lauder Group, the largest potential buyer this time.

Goldman Sachs and Estee Lauder are old acquaintances

As early as 2016, Goldman Sachs and Estee Lauder cooperated in the acquisition of Too Faced. Estee Lauder has made 12 acquisitions, with a total cost of more than 2.6 billion dollars. Among them, Too Faced is the largest transaction of Estee Lauder so far, with a transaction amount of 1.45 billion dollars. In this transaction, the two sides employed four investment banks. In addition to Goldman Sachs, BNP Paribas, Evercore and Jefferies also participated in this transaction.

Too Faced has always been famous for its eye-catching product name and unique packaging, and has more than 7.3 million Instagram fans. In the previous years when it was acquired by Estee Lauder, the growth of Too Faced was remarkable, with a compound annual growth rate of 60%.

This is a successful transaction for Estee Lauder. Through this transaction, it strengthened its leadership in high-end cosmetics category. Goldman Sachs also deepened the relationship with Estee Lauder through this transaction. In addition to M&A cooperation, Estee Lauder Group also employed Goldman Sachs to issue Senior Notes (a kind of corporate bonds).

02 Why did Estee Lauder choose Tom Ford?

In recent years, Estee Lauder Group has participated in mergers and acquisitions that are relatively small. For example, it has acquired Deciem Inc., a Canadian beauty company, and Have&Be Co., a Korean skin care company, with about US $1 billion. However, Estee Lauder is not satisfied with the status quo, and has been exploring potential acquisition targets.

Estee Lauder's interest in Tom Ford this time is not temporary. Tom Ford himself amazed the whole fashion industry when he was in charge of Gucci; Estee Lauder's executives also mentioned their appreciation of Tom Ford's achievements in May: Tom Ford is one of the few brands that achieved double-digit sales growth.