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How Not To Ruin Your Brand Once You’ve Sold It

Is it possible to sell your brand without selling out? Sarah Brown talks to a group of key beauty founders about the new rules for navigating corporate waters and protecting your company — and yourself.
Broken cosmetics | Source: Shutterstock
  • Sarah Brown

NEW YORK, United States — As the M&A beauty bonanza rolls on (and the coming corporate tax cut may only accelerate this activity), the beauty aisles and our Instagram feeds are not only bursting with former-indies-turned-global-blockbusters, but are also dotted with cautionary tales of companies that lost their light, their way — and usually, their founders — at some point after they were acquired. It is possible to sell, though, without selling out. Here, straight from the entrepreneurs who have not only hit it big personally, but have taken their companies to new heights in the process, are the guidelines for not ruining your brand once you've sold it.

Know when to sell— and why you’re selling.

For Lisa Price, founder of Carol’s Daughter, the multi-ethnic skin- and hair-care brand she started in her Brooklyn kitchen in 1993, selling to a third party was by design. “I knew an exit strategy would be my story,” she says.

Price’s company was built with all-star investors — including Jay-Z, Steve Stoute, Jada Pinkett and Will Smith — and in 2007, private equity firm Pegasus Capital Advisors took a stake in the business. In April 2014, after an up-and-down period that included the closure of its retail stores, the company filed for bankruptcy protection. After reorganising the business to focus on its wholesale network of more than 4,000 points of sale, L’Oreal acquired Carol’s Daughter for an undisclosed sum in October 2014.

The timing is right, Price says, when “you get the company to a place where infrastructure is looking good, numbers look good and you have a story to tell about what the brand has gone through and where it’s headed.”

“Consider selling when you get to a size where you can’t effectively grow yourself anymore,” says Eddie Roschi, co-founder and scent creator of the indie fragrance darling Le Labo, which sold to Estée Lauder Companies for an undisclosed sum in 2014. They’ve tripled their business since being acquired, says Roschi, to reach annual sales which market sources estimate to be upward of $60 million.

Pick the right partners in order to protect your brand — and yourself.

As Price points out, it starts with selecting the right bankers before a potential parent company is even approached. “These are the people who are going to negotiate on your behalf. You want to have people who understand you and what you’re looking for. They are your advocates,” she says.

“If you want to preserve the brand you’ve built, you have to sell it to someone you think will preserve it with integrity, so it will last as long as possible with the original vision,” says Roschi.

Consider selling when you get to a size where you can't effectively grow yourself anymore.

As follows, make sure you are entering this new relationship with a parent company that has similar goals for your business. “Say upfront what it is that makes your brand unique and why you should hold on to those things,” advises Price. “The reason they’re acquiring you is because they see value: You’re different, there’s a story, there’s something there that is authentic. The last thing they want to do is destroy that. It should be clear as you go through the process that your opinion is valued and that they really want you to be a part.”

Have realistic expectations of life post-acquisition.

Urban Decay selection of cosmetics | Source: Urban Decay

“You have to prepare yourself and your team to transition,” says Wende Zomnir, co-founder and chief creative officer of Urban Decay, purchased by L’Oréal in 2012 for an undisclosed sum (estimated at the time to be between $300 to $400 million). “I would sit down with the people acquiring and lay out a road map and timeline for the key integration pieces,” says Zomnir. “As long as everyone is on board about how and when things are going to happen, it will go smoother.”

But just because you’ve inked an agreement, it is not necessarily the end of the road. For Zomnir, the L’Oréal deal was not her first rodeo — she’s stayed with the company she co-founded in 1996 through three previous sales, first to LVMH in 2000, then to the Falic Group in 2002 and then to private equity firm Castanea Partners in 2009, which prepped the brand for its eventual sale to L’Oréal. “The first time with LVMH, that was the big opportunity to lose ourselves, because there was not a clear plan of action; they were just going acquisition-crazy,” says Zomnir. “The Falics were really hands-off — just ‘go run your business.' With L’Oréal, it’s been more of, this is our home, how are we going to partner to make the brand bigger and better?”

For entrepreneurs who have never worked outside of a tiny, familial inner circle, corporate culture can be shocking; and if you’re not prepared, new team members who suddenly have a hand in your business can feel devastating. “When you’re negotiating, get a clear vision of what it’s going to be like in that environment,’ says Price. “Talk to a founder who has been in a similar situation.”

Once you’ve sold, stay.

“Generally, if you want to not ruin your brand, you have to stay,” says Zomnir. “You will have to spend more time managing relationships between you, your people and the group that has acquired you. You have to be OK that your role is going to change.”

And when a brand is predicated on the presence, voice, style, spirit, accessibility and overall guiding light of a visible founder, it’s important that person remains in the spotlight. That means more than a hollow ambassador role. “Our face, our involvement, our happiness are important to the success of the brand post-acquisition,” says Price. “The consumer needs to know we are still there.”

You can't just take a brand and plug-and-play.

When Jamie Kern Lima sold IT Cosmetics to L’Oréal in 2016 for an earth-shaking $1.2 billion, she says the question of her staying on “was the number-one concern from our customers.” Not only did she stay — insisting that her manufacturer, manufacturing process, formulas and even the location of her offices, in Jersey City, remain the same — she retained her chief executive title, which she credits Carol Hamilton, group president of L’Oréal’s Luxe Division, with fighting hard for her to keep.

“You can’t just take a brand and plug-and-play,” says Zomnir. “Each brand is a unique little organism and you have to integrate those brands in an authentic way and engage the founders so they stay.”

Stila 'Colour Balm' lipsticks | Source: Stila

Of the mid-90s indie Stila — the original cult cosmetics line, founded by the visionary makeup artist Jeanine Lobell and sold, originally, to Estée Lauder in 1999 — Zomnir says, “I’m not sure people realised how important it was that Jeanine was there. If it was sold today [for the first time], they’d do anything to keep her.” (Lauder subsequently sold Stila in 2006 to private equity firm Sun Capital Partners, which in turn sold it to Patriarch Partners in 2009.) The brand has churned out blockbusters like the best-in-class Liquid Liner along the way, but many feel it has lost its original quirk and It-girl identity, which set it apart from the pack in the beginning and put it on the map.

Make sure you bring your people with you, too. “It’s important that the key team members, the ones that got you where you are, have exposure and are legit players,” says Zomnir. “I am super committed to the people who work for me, to the brand, and to keeping it on the right path. That’s why you stay.”

Find the right allies and advocates.

Expect growing pains. Also expect new people to inevitably come in, so make sure they understand what your brand is about — and what you are about.

“You have to distill it down so other people can understand it and execute that vision,” says Zomnir.

“You have corporate imperatives, but at least have a person there who is able to make sure the brand can be defended in an authentic and original way,” adds Roschi. “Connect with people who understand what you are doing.”

Keep doing what you do. It’s why you were acquired.

“One of the most important things is remembering who you are,” says Price. “Even though I sold to L’Oréal and am technically an employee of L’Oréal, I am still Carol’s daughter. Everyone in the room still looks to me to be the walking, living, breathing embodiment of what I have built. Remember that you walk into the room being the person no else can be, the asset they have acquired for a reason.”

Carol's Daughter 'Rhassoul Clay' conditioner | Source: Carol's Daughter

“I have to be a part of the ideation of what’s coming next,” she continues. “I started doing this from a love of fragrance. I still tell my scent stories, marrying the purpose of the product with its scent. The storytelling is important to me; it can’t be, ‘the labs have this great formula and it tested well.’ When I have to stand up on Home Shopping Network or at a press event, how am I going to go from who I’ve always been to ‘the labs had a great formula?’” While Price does take advantage of L’Oréal’s labs, she frequently brings the chemists emulsions she’s cooked up in her kitchen, “and we operate from there. I can always tell a story about what it is I created, and why.”

Much of Urban Decay’s continued success can be traced back to the fact that throughout the brand’s ups, downs, twists and turns over the last 20 years, Zomnir, who has kept her team in Newport Beach, has fiercely protected the house DNA as the brand has grown. “Urban Decay is ‘beauty with an edge,’” she says. “Everything we do has to have some elements of Feminine (it’s beauty so it should make you feel beautiful), Dangerous (the grittiness) and Fun (don’t take yourself too seriously). We’ve had to be precisely clear about what those things mean.”

Keep your cool.

Take care to balance new business demands with what makes you special and earned you customers in the first place. It’s a question of devising a plan that allows for growth — likely the reason you were acquired — while delicately keeping your credibility intact.

At Le Labo, Roschi and co-founder Fabrice Penot keep the identity, and authenticity, of a niche indie alive by continuing to launch experimental ideas intended to “nourish the soul of the brand,” and build a community and culture, rather than simply “an efficient product that sells.” Recent launches designed with “business in the background” include the $90 Liquid Balms, $50 Santal 26-scented notebooks, and $60 waxed canvas tote bags. Amulet, a $76 portable ceramic diffuser for use with the brand’s perfume oils is “a way of carrying your favourite smell, of having the smell of someone you love in your bag. Believe me, it was a nightmare to develop and we don’t sell many, but we’re very proud of it,” says Roschi.

Connect with people who understand what you are doing.

This same philosophy informs the brand's retail expansion. Pre-acquisition, Le Labo operated 15 freestanding boutiques and was available in roughly 20 handpicked specialty and department stores. Today, they've moved into Nordstrom across the US and duty-free shops across the globe. While airport malls are not exactly dripping with indie cool factor, the founders balance that play for mass commercial exposure with continuing to open their own stores in places where image, discovery and experience are the priority. Some of these shops, in cities like Portland, London and Berlin, do not make a profit, says Roschi, but they are "where we should be — we like what they represent; we like the people there."

“We are still convinced that the people we interact with [at Lauder] understand what Le Labo is and what it takes to keep it successful,” says Roschi. “And if they screw it up, they’re the ones who will have a mess on their hands.”

Grow at the appropriate pace and scale for your business.

This goes for expansion into new markets as well as product extensions.

Le Labo's 'Mousse de Chene 30' unassembled | Source: Le Labo

“When you’re dealing with a big company, they want you to launch more products, but we explained that it’s more about finding something special that your clients will also agree is special,” says Roschi. Of Lauder, he says, “they respect that the brand has a certain launch speed. We’re still releasing perfumes at the same old rhythm, roughly one every two years, when we think we have something in our hands that’s incredible.”

When expanding distribution, Price, whose line went from just under 4,000 doors to 28,000 post-acquisition, preaches caution, encouraging small brands to raise adequate awareness, and to make sure they are ready, before pursuing aggressive expansion. “It depends on the brand and where it’s playing, and where the customer is. Prestige may advance at a slower pace to keep that specialness,” she says. Carol’s Daughter, not yet available in Europe, launched in five countries across Africa in 2017 and is moving into the Caribbean this year.

Fight the right fights.

Of all of the challenges involved with transitioning from being footloose to tethered to a large corporate entity, one of the most unnerving is certainly the realisation that, as the founder and original visionary, you do not ultimately call all of the shots anymore.

“As the leader of a brand, you have to push back on big issues,” says Zomnir, who uses the example of refusing to enter the Chinese market, a move that would certainly be lucrative, but would require animal testing, which Urban Decay has always been staunchly against. “When you’re clear on your stand, I’ve found L’Oréal to be respectful,” she says. “They will question me, but when I say, ‘Here’s why I’m sure,’ they understand. It’s important to stand up for those things, because that’s who your brand is. The customer wouldn’t forgive us and I wouldn’t forgive myself.”

There's data, but there's also your opinion and your gut.

“There’s a lot of process here and some of that can be detrimental to an independent brand, but it’s not the intention,” says Price. “My response is to say, ‘How can we do this and still not compromise what’s been built over 20 years?’ They don’t have to listen to you, but it’s been my experience that they do. I come with numbers and information, and we have levelheaded conversations. There’s data, but there’s also your opinion and your gut. As a founder you have to be prepared to fight that fight.”

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