From that position of relative strength, Premier has evolved a strategy that involves looking for operations that might serve as an effective complement to what its beauticians and administrators already do well. That means offering someone an exit strategy, sometimes on a business that’s become distressed.
“It’s a rollup strategy that we’ve employed when people have built their businesses, particularly spas or larger salons, over a period of time and have nowhere to go,” Luborsky said. “Or in some cases, a landlord comes to us with a location that has gone under, say through Chapter 11 bankruptcy, and we’ll buy those types of locations.”
To execute strategy, Premier lays groundwork methodically. For instance, its luxury division carries the lengthy name of Halcyon Days Salons & Spas to allow the brand to bring a variety of new operations under its umbrella.
“Sometimes we’ll buy a salon that doesn’t do any skin care, and sometimes we’ll buy spas that don’t do any hair,” Luborsky said. “We have to have a pretty flexible name because we buy different things.”
Premier makes a point to keep cash on hand for moments when opportunity knocks. That tactic paid off in February when the company more than doubled its store count by purchasing 717 venues from Regis Salons, another major beauty chain in North America.
Gaining a toehold
Premier chooses its acquisitions carefully. It doesn’t venture beyond the beauty business, Luborsky said. Staying in that comfort zone of a familiar industry enables the company to diversify in a different way: geographically. Although based in Canada, Premier has grown to a point where 92% of its locations are in the US.
Within the beauty industry, Premier looks for businesses with assets the company can leverage effectively. One factor that made the recent deal with Regis especially appealing was the well-priced real estate. Although Premier didn’t actually acquire the land where Regis’ stores were located, it did gain an important toehold by establishing a presence in desirable malls across the US.
“You can’t get into all those malls by just walking up and saying, ‘Let me in’,” Luborsky said. “Now we’re in them, and we’re starting to add our other concepts there. So, strategically, it was pretty important.”
Premier has perfected the art of the acquisition through experience. The company once bought an enterprise that was 36 times its own size. But Luborsky said the firm has also learned to make sure not to get in over its head by creating a scale that becomes unwieldy.
“We wouldn’t just keep doubling in size every five minutes because then we’d lose control of it,” Luborsky said. “But the scalability of our business is such that we think we gain a lot by making smart purchases.”
With the recent acquisition from Regis, Premier gained four new divisions: Trade Secret, Pure Beauty, Beauty First, and Beauty Express. These lines tend to excel in product sales, Luborsky said, and that makes them an effective complement to Premier’s service-focused divisions, which include Premier Salons, Sears Hair Studio, and Winston’s Barber Shops (named for Luborsky’s Great Dane).
Once Premier moves ahead with an acquisition, its managers move quickly to exploit new opportunities. Among the most important principles is leveraging scale. Having more than doubled in size this year, Premier is exploring how to adjust working relationships with key vendors.
“We’re now a way more important customer for, say, L’Oreal than we used to be,” Luborsky said. “We’re better partners. We can get more done. We can get better pricing for our customers and get more volume for them to help their profits.”
Premier is also allocating managerial functions on the basis of what’s worked well in the past. For instance, Trade Secret now uses Premier’s employee management system for screening, recruiting, and retaining. Another example: in the past, Trade Secret would have promoted only its specials on particular products, but now its stores have posters advertising service components, such as highly trained stylists or specials on certain hair treatments.
Meanwhile, Premier has brought some of its best practices to bear on facilities that formerly belonged to Regis. Gone are one-size-fits-all-locations pricing. The same cut or treatment no longer costs the same anywhere in the US. Customers in New York City pay more than those in rural areas.
Commission structures have changed, too. Instead of receiving a flat rate on commissions, as used to be the case at Trade Secret salons, stylists now have additional incentives as they earn anywhere from 40% to 55% on a cut. Those who sell lots of hair care products earn even more.
Even with lots of experience with acquisitions, Luborsky said he always expects a period of trial and error. Figuring out the right balance when introducing new products to a store’s inventory, for instance, is something that doesn’t unfold according to a formula. Only by tracking what sells and what doesn’t can a particular location find its way to maximal productivity.
Still, knowing the art of the well-executed acquisition can make a lot of things go smoothly in a transition. That’s good for peace of mind, too, for executives who like knowing that in the search for extra advantage, they’ve left no stone unturned.