In November, The Estée Lauder Cos. became the brand new owner of Tom Ford, marking the beauty giant’s first enterprise into the style world and its biggest deal ever.

The acquisition also paved the best way for the enduring designer to potentially exit the industry.

Paying $2.3 billion to accumulate the posh fashion, beauty and eyewear brand, Lauder outbid rival Kering, which was reported earlier that month to be a front-runner for the corporate.

As a part of the deal, Ermenegildo Zegna Group and Marcolin SpA entered into long-term license agreements for Tom Ford fashion and Tom Ford eyewear, respectively. Marcolin has been the eyewear licensee since 2005, while Zegna has had the license for Tom Ford menswear since around 2006. Now, it’s chargeable for all of Tom Ford’s fashion business, marking an extra expansion by the Italian menswear powerhouse group into women’s fashion.

The deal valued the full enterprise of Tom Ford at $2.8 billion. The quantity to be paid by Lauder for the acquisition is about $2.3 billion, net of a $250 million payment to Lauder at closing from Marcolin SpA.

As big of a move because the agreement was for Lauder, it also represented a significant step by Ford and his partner and chairman Domenico De Sole — potentially paving the best way for his or her exits from a fashion scene they’ve been a significant a part of for nearly three a long time.

Under the agreement, Tom Ford, founder and chief executive officer, will proceed to serve because the brand’s creative visionary after closing but only through the top of calendar 2023. De Sole, chairman of Tom Ford International, will stay on as a consultant through that period, too. It’s unclear at this stage whether Ford will extend his fashion design profession beyond next yr or as an alternative leave the scene to pay attention solely on his other vocation, film directing.

“As an owned brand, this strategic acquisition will unlock latest opportunities and fortify our growth plans for Tom Ford Beauty,” Fabrizio Freda, president and CEO of Lauder, said in a press release on the time. “It can also further help to propel our momentum within the promising category of luxury beauty for the long run, while reaffirming our commitment to being the leading pure player in global prestige beauty.”

Tom Ford said, “I couldn’t be happier with this acquisition because the Estée Lauder Corporations is the perfect home for the brand. They’ve been a unprecedented partner from the primary day of my creation of the corporate and I’m thrilled to see them change into the posh stewards on this next chapter of the Tom Ford brand.”

For its part within the deal, Ermenegildo “Gildo” Zegna, CEO of Ermenegildo Zegna Group, which also owns Thom Browne, described Tom Ford as one of the “iconic and distinctive ultra-luxury brands on the planet” and said this next step together perfectly aligns with its strategy.

“This transaction is our first since our listing on the Recent York Stock Exchange in December 2021, and confirms our commitment to leverage our platform to create value for all of our stakeholders,” he added.

While the deal marked the cosmetics giant’s first foray into fashion, it has had a licensing partnership with Tom Ford Beauty since around 2005.

At a Deutsche Bank conference earlier this yr in Paris, executive vp and chief financial officer Tracey Travis said: “Tom Ford and Jo Malone are two of our largest midsized brands which can be knocking on the door of being over that $1 billion threshold to be large brands over the subsequent couple of years.”

But not all parts of the wonder arm have been performing equally well. Lauder revealed earlier in November in its first-quarter fiscal-year earnings that Tom Ford Beauty makeup was negatively impacted by the decline in retail traffic and travel on account of the COVID-19-related restrictions. But on the positive side, Tom Ford Beauty fragrance net sales grew by strong double digits, powered by launches akin to Noir Extreme Parfum and Ébène Fumé.

As for market response, investors appeared to take the news of their stride.

In after-market trading, Lauder’s shares fell marginally, however the day after the deal, investors seemed to be relatively unfazed by the corporate’s largest acquisition thus far — shares dipped barely, by 1.8 percent, to shut at $222.91.

It was the same story for the publicly listed Ermenegildo Zegna Group, which is becoming a long-term licensee of the previous for all of Ford’s men’s and ladies’s fashion, accessories, underwear, advantageous jewelry, children’s wear, textile and residential design products. Zegna’s 20-year licensing agreement with Lauder allows for an automatic renewal for extra 10 years. As a part of this transaction, Zegna will acquire operations of the Tom Ford fashion business. The corporate’s shares ended the day up 2.3 percent to $10.97.

Of the deal, Olivia Tong, an analyst at Raymond James, said: “That is EL’s largest deal thus far, with now full control of a fast-growth brand pivotal to what we expect might be EL’s eventual recovery in China and travel retail. Importantly, we expect minimal transition disruption within the non-beauty portions of Tom Ford, as Marcolin continues because the brand’s eyewear license partner and fashion brand Ermenegildo Zegna will proceed because the brand’s fashion, accessories [and] underwear partner.”

Given Tom Ford’s super-premium positioning in beauty, she believes the brand should proceed to be a growth driver for Lauder, with the brand’s fragrance line rating number 15 within the U.S. and number 10 in China, while increased door expansion and consumer mobility should support makeup growth.

And in a recent deep dive of the deal, Ashley Helgans, an equity analyst at Jefferies, said: “We remain positive on the deal as we view little to no risk given EL has been operating TF Beauty since 2006. The best upside from the chance is the expansion of the wonder biz each online & into other categories, together with royalties from fashion & eyewear.”

She is assuming that Tom Ford Beauty reaches $1 billion in revenues in the subsequent few years, adding that a push into skincare can be viewed as a positive.

“EL lists creative oversight, increased speed and agility, and online penetration as key deal synergies. We’re optimistic innovation will bear fruit, but we would love more clarity from management before baking this into our model. With that said, we might view a push into skincare as a positive given TF Beauty’s lower penetration,” she added. “We also support increasing TF Beauty’s online penetration, which is minimal to this point. The launch of a brand.com can be margin accretive given sales might be recorded at retail value vs. selling via wholesale/in-stores.”

For Zegna, which owns Thom Browne, Luca Solca, senior research analyst of world luxury goods at Bernstein, said it was an excellent deal. “It allows it to consolidate the license and to further develop after the acquisition of Tom Ford. I don’t consider the exit of Tom or Dom is a priority — it’s in the character of things.”

One Milan-based luxury consultant, who asked to talk on condition of anonymity, said for Zegna, acquiring the Tom Ford fashion operations is a latest solution to aggregate different businesses. “It seems that the IPO has made Zegna more courageous in its decisions, creating synergies, while each company does its best inside each area of specialization.” Zegna publicly listed on the Recent York Stock Exchange in December 2021.

Along with being a longtime Tom Ford menswear licensee, Zegna was also a shareholder, with a 15 percent stake in the corporate, so this latest development is seen as “a natural step,” said the consultant, which “will allow Zegna to strengthen its womenswear segment, and the group at large. Zegna has a robust supply chain built through the years and its textile or knitwear pipeline could be put to good use. The sky’s the limit, it’s all to be shaped and formed and Gildo Zegna will certainly create an appropriate structure to fuel the brand’s development.”