In late January, The Body Shop said it was selling a swath of its international business in a deal that the ethical beauty brand hailed as a “critical step towards delivering a robust transformation strategy”.
The buyer of hundreds of stores in Europe and Asia has been described as an unnamed “family office” by the chain's new private equity owner, Aurelius, who did not mention any ties to the buyer.
But instead of a wealthy family, the buyer was Friedrich Trautwein, a German businessman who had previously been involved in at least five investments in Aurelius, including several corporate failures, according to company filings and people familiar with the matter.
“His specialty is working with distressed companies,” a person close to Aurelius, which bought The Body Shop from Brazil's Natura & Co. in November, told the Financial Times. “He's basically the guy who can appoint the officials and run that through the course.”
People who dealt with both Trautwein and Aurelius said that he frequently acted on behalf of the company, including sitting on the boards of portfolio companies and helping them turn around their businesses or deal with their bankruptcies, and that he had a close relationship with the company's president, Dirk Marcus.
Trautwein's involvement raises questions about the nature of the deal, who will benefit, and whether his role in handling the demise of several Aurelius-owned businesses foreshadows what is to come for most of The Body Shop's international division.
In what has been a messy transfer of ownership, Trautwein's UK managers and The Body Shop have been negotiating which countries he will be responsible for running, according to some people and emails seen by the Financial Times. This has created uncertainty in some international business units, the people added.
It took nearly two weeks before some senior executives at the company's international branches were able to contact their new owner.
The same last week that Aurelius placed the British company in the hands of administrators, Trautwein told international staff that the German arm had also fallen into administration, according to two people he briefed on the matter, who said the Belgian division was set to follow. The Danish arm has since been placed into administration, and the Austrian team is preparing for bankruptcy, one of the people said.
Trautwein has known Markus since the latter worked at McKinsey in the late 1990s, where he honed his skills at the restructuring arm before leaving and later becoming a founding partner of Aurelius.
At the new company, the duo first collaborated in a 2009 deal in which Aurelius spun off electronics maker Blaupunkt from German group Bosch, using a playbook the company would repeatedly follow when acquiring distressed companies.
After taking steps to protect Blaupunkt's intellectual property, and preserve the benefits of the brand's heritage by licensing it to other electronics manufacturers, Aurelius later merged Blaupunkt with another German company, KWest, which eventually collapsed. Trautwein was called in as KWest's liquidator, a company filing shows, and Aurelius retained control of the Blaupunkt brand before selling it last year to a US company.
Meanwhile, Trautwein and Aurelius turned their attention to the United Kingdom. Trautwein has been involved as either a director or on the board of a host of Aurelius acquisitions in the country, including book wholesale company Bertram Books, TV sales company Ideal Shopping Direct, and car repair group Autorestore, according to company filings and people familiar with the transactions.
Two people said he was traveling from Germany to work with portfolio companies a few days a week, helping them strategize. Another person added that he also acted on behalf of Aurelius in at least one case of a company that declared bankruptcy.
Some companies that worked with Trautwein suffered. Both Bertram Books and Ideal Shopping have filed for bankruptcy in recent years.
People who dealt with him described him as highly intelligent and uncompromising, and his relationship with Marcus was clear to those he worked with. “He's the only person I've ever seen reprimand Marcus,” one said.
By last year, Trautwein and Aurelius were ready to take on their biggest challenge yet: turning into The Body Shop.
Aurelius in November agreed a £207m deal to buy the company from Natura, pledging to restore it to its former glory as a champion of ethical capitalism, after first expressing interest in August.
But the company quickly ran into trouble after weak Christmas sales, compounded by the complexity of a presence in about 70 markets from Canada to Japan, some of which were loss-making.
Aurelius decided to form some of his own international units including those in Germany, France, Japan and Belgium, along with approximately six others.
Trautwein has emerged as a buyer, acquiring units in markets including Austria, Belgium, Germany, Ireland and Luxembourg, according to people familiar with the matter.
Aurelius, which previously said it did not benefit from the sale of its international division, did not name Trautwein as the buyer or disclose its previous relationship with him.
The fact that a large portion of the business has been acquired by an unknown party has caused panic within the company that weeks ago was owned by a multi-billion-dollar international conglomerate, according to several Body Shop employees. They were told days later that the buyer was Alma 24, a company Trautwein founded in late January.
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FRP and Aurelius declined to comment. Trautwein did not respond to requests for comment.
In many of its markets, some former and current managers have refused to sign the paperwork necessary to transfer operations because they fear they will be held liable for any future insolvency, according to people familiar with the situation.
French operations, protected by strict employee protection rules, have been left stranded, current employees said. Employees were told that their portion of the business was not only being taken over by Trautwein but also being cut by The Body Shop, according to two people familiar with the matter.
With hundreds of jobs at stake and a sprawling network of companies to oversee, Trautwein will have to do whatever it takes to turn things around.
“He would never give it up,” said one executive who worked with him previously. “He takes pride in it.”
Meanwhile, employees still face an uncertain future. “Every time I wake up, it's like I'm starting the same nightmare,” said a senior executive at The Body Shop.
