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Author: Francesco Spada, Content Creator

The Esteé Luader Companies Inc., one of the most important companies in the #cosmetics, perfumes and skin/hair care market, recently acquired Tom Ford, a luxury fashion brand, for a value of $2.8 billion. The news appeared after several rumours in the last month that indicated Kering as a possible buyer of Tom Ford. Tom Ford is the luxury fashion brand founded in 2005 by the American designer Tom Ford, who has always been the owner. The company is focused on menswear, but it also got into the business of womenswear, cosmetics and perfumes. Esteé Lauder will have to pay $2.3 billion for the acquisition #deal, net of $250 million payment by Marcolin at closing. The company will fund the operation through a mix of cash, debt and $300 million in deferred payments to sellers expiring from July 2025. There are several advisors who have taken part in this #M&A transaction. Perella Weinberg Partners LP acted as financial advisor to The Estée Lauder Companies Inc. and Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as general counsel. Tom Ford, instead, was assisted by Goldman Sachs as financial advisor and by Skadden, Arps, Slate, Meagher & Flom LLP as legal advisor. Analysts say that this transaction will be dilutive to adjusted diluted earnings per share in fiscal year 2023 by 0.05-0.15 dollars. This is due to one-time acquisition related costs. The deal includes several #clauses; first of all, Tom Ford, the founder of the company, will keep the role of Creative Head until the end of 2023. Furthermore, the Italian company Marcolin, one of the world leaders in the eyewear production, will take over the management of the eyewear division of Tom Ford and will pay $250 million to Esteé Lauder at the time of closing. Zegna, on the other hand, signed an agreement with which it obtained a long-term #license to manage the fashion division of Tom Ford, within which it will manage menswear, womenswear, underwear and accessories. In particular, Zegna will acquire the assets of Tom Ford fashion business. Zegna and Tom Ford will use synergies and their know-how to further develop their brands. The two companies had already matured a series of past collaborations which will continue in the future. The benefits that The Esteé Lauder Company will get from the acquisition are the longterm cash flows from the Tom Ford beauty division, which has been growing tremendously in recent years, additional cash flows from several licenses and the elimination of the beauty’s division royalty payments. Furthermore, Esteé Lauder will be able to benefit from a greater penetration in ecommerce market. This beauty division became a success thanks to a single fragrance, Black Orchid, developed in 2006. In 2011, this division created its first make-up line which today generates a large part of the company cash flows. In the fiscal year ended in June 2022, Tom Ford Beauty has registered a #growth in net sales up nearly 25% than the previous year, and the analysts estimate that the brand achieves annual net sales of one billion dollars over the next two years. This enormous growth justified the intention of Esteé Lauder to acquire Tom Ford.


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