Would the acquisition of a troubled salon chain prove financially beneficial for the acquiring company and its investors?
Would the acquisition of a troubled salon chain prove financially beneficial for the acquiring company and its investors?
In 2019, Implicit Wealth Holdings (IWH) was seeking an acquisition target that would be recession-proof and not in competition with Amazon. In 2020 the IWH team believed it had found a lucrative acquisition prospect in the hair salon industry: the Shear Cutters chain of salons. Shear Cutters had closed all 800-plus of its open salon locations amid the COVID-19 pandemic and the closely held company soon ran into financial trouble and was unable to meet its payroll obligations. The holding company for Shear Cutters filed for Chapter 11 bankruptcy, reporting an asset purchase agreement to sell substantially all of the company's assets to Expressive Styles, an affiliate of IWH. As part of the deal, Expressive Styles agreed to provide the debtors with debtor-in-possession financing that would allow the chain of salons to continue operations as soon as restrictions meant to slow the spread of COVID-19 were lifted. This case details the turnaround process that ensued—including bankruptcy court, painstaking data analysis, operating triage, and the rehabilitation process that followed—and asks students to consider whether the IWH team had done enough to satisfy its investors. This case is based on an actual business scenario, with all names and data altered to protect company confidentiality.
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