In My Shoes: A Memoir (23 page)

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BY NOW WE WERE BACK
in our “repetition compulsion” of meeting with Goldman Sachs and Morgan Stanley to discuss the next sale. Like any other form of addiction, once you’re hooked on private equity, you can’t change the destructive behavior. You just plug in new people, one cycle imposing itself on the other.

For me, facilitating due diligence had become a tiresome second job. Meanwhile, our competition wasn’t necessarily going through the same kinds of distraction and could focus on the real work of creating and maintaining quality and innovation.

Akeel at Rothschild wanted to handle the sale but Ramez didn’t want to work with him because of past history. Funny enough, even though Akeel had taken up arms in Robert’s conspiracy in the sale to TowerBrook, I thought he would have been the best person to represent us. He understood what we were all about, and I think he would have been able to extract the most value.

TowerBrook thought Morgan Stanley would do a better job, but they also wanted to keep favor with Goldman Sachs. In the end they found a way to work with both, having the two banks work together and split the fees. The transaction wasn’t going to move the needle much for either firm, but it was a nice, glamorous, high-profile sale, and even the finance sector was still climbing out from the collapse of 2008.

We had no problem stirring up interest among buyers. We asked for first bids in March, and the players making bids ranged from Labelux
(partnered with Investcorp), Texas Pacific Group (TPG), to KKR (Kohlberg Kravis Roberts), to Carlyle, to Li & Fung. Final offers would be evaluated in May.

I flew to London and stayed at the Ritz for ten days of dog and pony shows, which we held at Brown’s on Dover Street. We presented to Labelux on April 13, to Jones Group on the fourteenth, and to TPG on the twentieth. Tom Barrack, a friend of mine who owns Colony Capital and bought Miramax from Disney, called a friend of his, David Bonderman, TPG’s founding partner. Bonderman’s personal wealth was estimated at $3 billion, and it was said that he never left the United States. But at Tom’s suggestion, David came to our London presentation, and it was the talk of the town when he showed up.

From that first round three suitors emerged—Labelux (sans Investcorp), Jones Group, and TPG. Stupidly, though, Ramez and our bankers didn’t check the Jones Group’s balance sheet to see if they actually had the resources to play at this level, which they didn’t. So when we actually got to the auction in May, we had only two bidders, which is an exponentially weaker position than having three.

I was secretly rooting for Labelux, who had first contacted me in the summer of 2008. They’re not private equity but a luxury holdings group, owned by the Reimann family, whose über fund, Joh. A. Benckiser, had been in business since 1823. They owned Coty, and they’d recently acquired Bally, and I saw them as owners who might take an interest in the brand beyond how its EBITDA would look in two and a half years. But again, Ramez didn’t want me to speak to anyone. He needed to be in control, and he feared that I might make demands that would put off a buyer or affect the selling price.

Whenever I was so reckless as to voice an opinion, Ramez would call me at home and scream at me. “I’m pulling this deal,” he’d say. “You need the money and I don’t.”

But the fact is I was liquid again. I’d won the court case with my mother, I’d lost only about 10 percent on the hedge funds, and their firewalls were now coming down, which allowed me access to my money. More to the point, I had petitioned Ogier, the trustee for Araminta, to dissolve that trust so that I would have free access to that money as well. This was not something they were obligated to do, but because I’d built the wealth, rather than having inherited it, they agreed.

I was able to remain very calm and tell Ramez, “Okay, don’t sell if you don’t want to.”

But I called Ron Perelman and asked him what to make of Ramez’s threats. He said, “Forget it. He’s way too pregnant with this deal. He’s not pulling out. He’s just grandstanding. Trying to bully you.”

“Keep your eye on the prize” was Ramez’s mantra, as if a big payoff was the only goal. But I actually cared about the business we were in. The product. The people. I wasn’t merely passing through. I’d rather pay people properly than see them burned out, crying in the office, and saying “I can’t take it anymore,” even if it meant I would make less on my investment.

We were getting closer to the endgame, with the pressure increasing, when I called Ramez and said, “I want you to know I’ve hired some people to come in and negotiate on my behalf.”

He went nuts. “I don’t want anyone you hire coming in and screwing up my deal!”

When we were able to speak in more civil tones, I said, “It’s highly
unlikely that my guy will ‘screw up’ your deal. He just negotiated the three-billion-dollar acquisition of Tommy Hilfiger.”

“You don’t trust me,” Ramez whimpered. “You don’t think I’ll get you a good deal.”

The fact of the matter was I firmly believed that “a good deal” for me wasn’t even at the bottom of his list of considerations. Every time I’d brought up any issues about how the management team was to be compensated, I was silenced, if not literally shouted down.

Toward the end of the conversation Ramez admitted, “Well, I suppose you do have the right to protect yourself.”

The adviser I brought in was Joe Lamastra, who for fifteen years had co-invested in various projects with Tommy Hilfiger and overseen all his business, real estate, and tax matters.

Labelux, through Akeel, had been trying to contact me, but for the longest time I honored my commitment to have no side conversations with any of the bidders. I wouldn’t even call them back, but after a while I said, “Fuck it. Ramez is throwing me under the bus as usual. So all bets are off. I’m going to take up my issues with Peter Harf.”

Harf was the chairman of Labelux, and when I called about a meeting, he offered to book the restaurant. I said, “No. I don’t want to be seen in public together.”

So he took a hotel room instead, at the Mark, between Fifth and Madison on the Upper East Side, and he had the bed removed and a table for two brought in with waiters coming and going, and it was one of the weirdest dinners I’ve had in my entire life.

I talked to him about why I’d launched the brand, tried to describe my passion for it, and tried to explain that, while I wanted to make
money, I also cared deeply about the business. And then I made my proposition.

“No one will buy this brand without me,” I said. “I’ll tell TowerBrook that I’ll only do a deal with Labelux, which will get you the business. But there are certain things I want.”

“I’m all ears,” he said.

“My life is in the States now,” I told him. “I live in New York with my daughter, and her father lives here as well, and I think it’s not unreasonable to move some of our operations to New York as well.”

He said, “We’re all worldly, sophisticated people. That’s a nonissue.”

Then he went offtrack a bit, probing for information that was more strategic. “There’s only one other bidder, right?”

He wasn’t supposed to know that, but obviously he had his spies. I said, “No, not really. There’s another.”

The fact was this third player was not in the same league as the other two. Investcorp had come in initially, then dropped out. But then they called Ramez and said, “If you do an IPO [rather than another sale], we’ll come in and buy one hundred million pounds equity pre-IPO.”

I let that information settle, and then I said, “I want to have more equity in the business. So I’d like you to loan me $25 million, which I’ll pay back with interest on the exit.”

Harf looked at me, then asked, “How much money have you made so far?”

I told him, and then he said, “You’re rather rich for a woman. Why do you need more?” He saw my face blanch, and he tried to cover. “Well, rather rich for anyone, really,” he said.

But I thought it was one of the dumbest, most sexist comments I’ve ever heard an intelligent person make.

Then he fumbled and mumbled.

I said, “Well, if you won’t loan it to me, I’ll find it elsewhere.”

And he said, “Where will you get it?”

I said, “I have friends.”

So he agreed, or at least he gave me the impression that he agreed, summing up our conversation with, “You’ll be very happy with your compensation.”

With that assurance, I walked out feeling really great. I called Martin and told him how good I felt. “You know that feeling in films where people punch the air?” I said. “I feel like I can work with these people.”

During the second round of bidding, in May, I met with Josh at the Jimmy Choo offices, and a simple comment from me triggered the only fight we ever had.

By now we were both totally exhausted and overwhelmed by the stress of the exit process, which consumes every ounce of energy. But no one had consulted me, and I had to make my concerns known.

I said, “One of my conditions is going to be that part of the office will move to Manhattan,” never expecting that it was going to tip Josh over the edge.

I knew the business plan had been written the way that TowerBrook wanted to present it, which was nothing more than financial engineering to elicit maximum value. Any curveball from me, such as moving the office to New York, would be a capital expenditure large enough to affect EBITDA, and therefore the purchase price.

“Be honest,” I said. “You want to move back to New York. You told me so. So why are you pushing back now?”

Of course I knew the reason. He was just doing his job. But even as an investor I was more than willing to go off plan and restructure for the long-term benefit of the company. I certainly didn’t care about TowerBrook’s fees and their “carried interest” tax advantages. I didn’t care about TowerBrook because they didn’t care about the business or the people in it. To me they were nothing more than another pack of private-equity vultures just passing through, trying to pick off for themselves everything they could.

The final bids were due May 13, and Labelux came in at £550 million. TPG bid £475 million. Narrowing the gap, Labelux added £25 million in deductions for costs they said they were going to have to absorb.

But Labelux was the clear winner, and now we had nine days for one-on-one meetings between our management and our new partners to be. Even so, TowerBrook insisted that I not speak to anyone from Labelux without one of their bankers present. So effectively, I was still being quarantined, prevented from voicing my concerns about a move to New York and about the financial package for management.

Our team had worked far too hard to be thrown to the wolves, and I was dismayed by the way the lawyer representing the management team rolled over on every issue. I e-mailed Josh and said that I didn’t understand her position, because he was going to be financially damaged just like everyone else. And the deal on the table was absurd. Management could invest their own money, the shares would run for ten years, but nothing would become vested until five years down the road. You could pull out before then, but you’d realize no gain in value.
Even if you waited to cash out until your shares were fully vested, they’d organized the structure so that these management shares were taxed as income rather than as capital gains. This was cheaper for the business, but it would cost each individual from 20 to 30 percent.

I asked him to be a more forceful advocate, while I hired KPMG on the side to do a study to show how they could structure the management equity plan as capital gains.

Given all the screaming I’d had to endure, Joe Lamastra, my adviser, decided that keeping me away from Ramez was not a bad idea. Anyone who wanted to talk to me would have to do it through him.

So Ramez had his deputy, a decent fellow named Kareem, call Joe and ask for a meeting.

Joe said, “She’s not coming if you’re going to bully her.”

They promised to be on their best behavior, and so, with very low expectations, I took a car to the TowerBrook offices at the bottom of Haymarket.

The moment I walked in Ramez launched a vicious, verbal attack about my wanting to move the office. He was pounding the table with his fist as people began to arrive for a second meeting, and Joe looked on, appalled.

I could barely focus, thinking, “I can’t believe we’re having to go through all this again.”

Joe and I started to leave, but there was a scrum of people, and unbeknownst to Joe, Ramez pulled me aside. “We need to have a word.”

I was still so upset with him that I walked away, heading down the hallway to the lift to go downstairs. Just as the door was closing, this foot jammed in to make the door reopen.

“Oh, God,” I thought. “More torture and I’m trapped in a little metal cube.”

“I’m sorry,” Ramez started in. “I was angry. We’re okay, aren’t we?” He was like a man who hits his wife, then shows up with flowers.

I said, “You know, Ramez . . . Robert must have really done a good job on you.”

I went downstairs, and when I finally caught up with Joe, he looked grim. “I’ve never seen anything like this,” he said. “I don’t care what kind of deal it is—we’ve got to get you away from this lunatic.”

I flew back to New York only to have to immediately turn around and come back to London to talk to Reinhard Mieck, the Labelux CEO. All I wanted for myself was fair market value, and to be sure of my footing, I called several other women who’d founded similarly sized companies and worked at my level, and I asked about their compensation. Their packages ranged from $2 million to $3 million; my first salary offer from Labelux was £320,000!

The papers were to be signed on Sunday, and Labelux kept me waiting for my meeting with Mieck until Saturday. I was so stressed out that I kept my father’s black cashmere sweater with me. In the evenings I’d rub it against my face and take in the scent of him. I missed him so desperately.

As the week came to an end, just before we were to talk, Mieck suddenly had to race off to Germany, and Joe was forced to jump through hoops to track him down to get him to discuss my package over the phone. I could now see that TowerBrook and Labelux had kept me out of the process once their bid was accepted, and that in our meeting at the Mark, Harf had been little more than a stalking horse.