Accessing Capital & Growing Your Beauty Business Effectively
Ellen R. Herman, senior managing director, Investment Banking, National Securities, breaks down considerations when seeking capital and investment partners.
By Ellen R. Herman
Privately-held companies operating in the beauty industry may encounter challenges, due to changing fashion trends, among many factors, when growing their business and accessing capital. CEOs and management teams of beauty companies may focus on several key initiatives including –
• capitalizing on innovation in packaging and formula,
• protecting their intellectual property and any trade secrets,
• organic and “green” preferences by consumers,
• maximizing the value of their brand, and
• growing their business organically as well as through acquisition.
All of the above business objectives require a focused, well managed corporate finance strategy to access capital for growth. Potential partners that may provide capital and industry expertise include both corporates as well as financial sponsors. Strategic buyers can utilize cash or their stock as consideration and given the level of synergies that they can absorb, are often able to invest at a premium. Furthermore, private equity firms stand ready to deploy committed capital, and through their existing financing relationships, are able to act swiftly and commit to financing quickly.
The Time is Now
Now may be an opportune time for beauty and personal care businesses to identify growth capital by planning ahead and managing the process effectively.
Depending on the strategic objectives of the owners, I recommend reviewing the following checklist. It addresses certain issues that CEOs should consider when seeking capital and investment partners.
1. Investment Rationale – Identify why the owner(s) require additional capital in terms of a well-defined use of proceeds and timetable and whether all are in agreement about a potential investment.
2. Timing and Team – Determine management’s readiness and ability to allocate the time necessary to commit to business and financial due diligence followed by investor meetings.
3. Management Team – Establish the business roles that the owners envision, from their capital source, post investment (active or passive).
4. Valuation Expectations – Review pricing objectives and ranges that meet the objectives of the owners.
5. Tax and Structural Criteria – Business owners may want to consult with their tax advisors as to optimal investment structures that minimize tax consequences and/or ascertain the impact of any pending tax legislation.
Author Bio: Ellen R. Herman is a 20-year veteran of the investment banking community. She can be contacted at Ellen R. Herman, Senior Managing Director, Investment Banking, National Securities Corporation, 120 Broadway, 27th Floor, New York, NY 10271 tel: 212-380-2838. The opinions expressed by the author are not necessarily those of National Securities Corporation or its affiliates. Securities offered through National Securities Corporation established 1947, member FINRA/SIPC.