One Video to Begin: The Financial Times documents the ongoing battle between Indian billionaire Gautam Adani and short seller Hindenburg Research. And One Exciting Invitation: Due Diligence Live is returning, and you won’t want to miss it. Join us in London on October 17th for a gathering of some of the most influential names in finance and dealmaking, including Sarah Cardell, the chief of the Competition and Markets Authority, Bob Prince, the co-chief investment officer of Bridgewater, and Bruce Flatt, the CEO of Brookfield. Register early for a special discount. Welcome to Due Diligence, the go-to source for news on dealmaking, private equity, and corporate finance. This article is an on-site version of our newsletter. Sign up here to receive it directly in your inbox every Tuesday through Friday. Feel free to contact us anytime at [email protected] today’s edition: Behind the scenes of a $90 million Twitter payout; Why Kering paid a premium for Creed; New rivals emerge following Sequoia’s split; Elon Musk’s attempt to recoup $90 million from Wachtell Lipton; Goldman Sachs’ $80 million earnings from Twitter deal. JP Morgan Chase secured a deal fee of $53 million for its involvement. Law firm Wachtell, Lipton, Rosen & Katz received a total payment of $90 million for ensuring the deal went through. The details of this amount were only revealed recently by Elon Musk, CEO of Tesla, which is now Twitter’s parent company. Musk has filed a lawsuit against Wachtell Lipton in a California court in an effort to reclaim some of the $90 million that was paid to them. Twitter’s board hired Wachtell Lipton when Musk attempted to back out of the deal to buy the company. Wachtell Lipton is a small law firm with a reputation for handling high-profile M&A deals and earning substantial fees for their work. Musk’s lawsuit sheds light on how Wachtell Lipton was hired, including an unsolicited email sent to Twitter’s senior leadership last year, praising the firm’s expertise in Delaware litigation. Musk now argues that the $90 million fee was excessive and improper. However, this payment is in line with Wachtell Lipton’s history of earning significant fees for successfully closing deals or winning cases. The firm shared a fee comparison with Twitter, showing that they typically make 60% to 80% of what the bankers receive. Therefore, the $90 million payment aligns with the proportionate amount relative to the $133 million paid to Goldman and JP Morgan. Companies usually have wide discretion to compensate their advisers, even in sellside deals where the buyer bears most of the cost. Interestingly, Wachtell Lipton was not initially involved in the original M&A contract, but they seized the opportunity to get involved when the contract was unexpectedly contested. Despite Musk’s objections, Wachtell Lipton prevailed in this battle and received a significant sum of money for their participation. Kering’s acquisition of luxury perfume house Creed for €3.5 billion suggests a desire for self-preservation. The deal’s price was not initially disclosed, highlighting the high prices buyers are willing to pay for top-tier beauty brands. Kering’s purchase follows L’Oréal’s acquisition of soap maker Aesop for $2.5 billion earlier this year. Buying Creed could help Kering regain investor confidence. The French luxury group has fallen behind competitors like LVMH and Hermès due to underperformance at its flagship brand, Gucci. Kering’s creation of an in-house beauty unit is an attempt to reduce its dependence on Gucci. With limited options in luxury fashion or leather goods, Kering has turned to the beauty sector for growth. However, entering the ultra-luxury perfume market comes at a cost. The €5 billion market is growing at a staggering pace of 15% annually, three times faster than the rest of the fragrance market. Creed, founded in 1760, has impressive earnings and margins, which contribute to its valuation. Sequoia Capital’s split into three independent companies—US, China, and India and southeast Asia—has led to the emergence of rivalries among the divisions. Sequoia China, now known as HongShan, has set up an office in Singapore, putting it in direct competition with Peak XV Partners, formerly known as Sequoia India & Southeast Asia. HongShan aims to use Singapore as a base for investing in southeast Asia, which aligns with the trend of Chinese founders establishing operations in the city-state. Neil Shen, the managing partner of HongShan, has expressed interest in supporting existing Chinese founders with international businesses in Singapore and investing in new startups. It is worth noting that HongShan is encroaching on Peak XV’s territory at a time when some of their portfolio companies, such as Zilingo and Byju’s, are facing challenges. Zilingo went into liquidation earlier this year due to financial irregularities, and Byju’s lost its position as India’s most valuable startup. In executive news, Morgan Stanley has hired senior investment banker Marco Caggiano from JPMorgan, BT Group CEO Philip Jansen is preparing to step down, Barclays has appointed Jim Birchenough as the chair of global healthcare investment banking, former Joele Frank PR executives have launched a new communications advisory firm called Collected Strategies, Ares Management has promoted Zahir Khan to managing director and head of Middle East relationship management, and Gary Nagle is dealing with an identity crisis as the new head of Glencore.
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