Cash is king for salon consolidator. (Strategies of the Fittest).
"Make that six percent," says the 30-year veteran of the salon industry. Since Regis began expanding from malls to shopping centers in 1994, it has done more than 240 deals to buy 6,300 salons and now owns and franchises 9,000 stores in North America and Europe, including the chains MasterCuts and Jean Louis David.
Refreshingly, Finkelstein has eliminated the investment banking middleman from his acquisition formula. He has used a banker's help only once, when he consulted with Merrill Lynch to buy the mid-priced hair salon chain Supercuts for $150 million in stock. "Truth be told," he says with a chuckle, "we mostly just used Merrill for its fairness opinion."
Regis looks to buy companies for around three-and-a-half times Ebitda, according to Vice President Eric Bakken. The company uses a simple 16-page, double-spaced contract of sale that mom-and-pop sellers like immensely. Regis typically acquires one out of every three salons that approaches it, says Finkelstein, who joined Regis as executive vice president in 1987.
What's noteworthy about this public company is how well its financials are looking in the mirror. Regis reported revenues of $399.2 million and net income of $19.7 million in its first fiscal quarter ended Sept. 30, 2002, up from $350 million a year ago.
Cash is the operative word when it comes to understanding Regis. however. Regis had operating cash flow of $129 million in the 2002 fiscal year that ended June 28. Of that, $60 million went toward acquisitions. In 2003, he expects cash flow of $145 to $150 million.
Finkelstein's feelings about cash deals are strong: "That's just the way I like to do business. We stick to our word and we expect our targets to stick to theirs--it's about trust." How refreshing indeed.
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|Title Annotation:||Paul Finkelstein of Regis|
|Publication:||Chief Executive (U.S.)|
|Article Type:||Brief Article|
|Date:||Mar 1, 2003|
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