Corporate Development Spotlight

Spotlight Q&A:

Yvanna – Thanks for joining us for this issue of Corporate Development Spotlight! Can you provide a quick flyover of the Ulta Beauty corporate development team and approach to M&A?

At Ulta Beauty, we take a truly holistic approach to corporate development which we believe is so much more than M&A. With each strategic opportunity for growth, we consider acquisitions, investments, and partnerships that can benefit both Ulta Beauty, our guests and our external partners.  We seek to form mutually-beneficial, long-term relationships with startups and actively work to add value to our business.

The Ulta Beauty Corporate Development team is comprised of two teams with distinct objectives that complement one another. The Corporate Development & Strategic Partnerships team aims to support enterprise-wide initiatives as outlined within the company’s long-term strategic plans. One such effort is the Ulta Beauty at Target partnership. The Innovation Fund team’s primary goal is to support entrepreneurs with innovative ideas that we believe may impact guest experiences in the future. An example of this teams’ work is the recent investment in Revea which supports our focus on increased personalization for guests.

Given our enterprise-wide, holistic approach, it follows that our investment criteria center on the fit between the startup’s leadership and Ulta Beauty’s business unit that will ultimately own the relationship.

Given the importance of brand equity in your industry, how do you assess brand and fit at target acquisitions?

Since joining Ulta Beauty, I have implemented a thorough evaluation process to ensure our efforts ladder to three, key goals 1) the considered partnership directly ties to our enterprise or innovation strategy and will complement the guest experience, 2) Prospective partners have values that align with Ulta Beauty’s and 3) We leverage a robust, cross-functional diligence process designed to identify and minimize risks.

As a retailer, we are a ‘house of brands’ that supports all of our brand partners and our focus is to bring the best assortment, services and experiences to guests. Instead of prioritizing a specific brand, all of our investments, partnerships and acquisitions are centered on adding value to the Ulta Beauty guest.

Additionally, it is essential to understand that our relationship with each portfolio company is not simply transactional. On top of forming strong partnerships with mutually beneficial terms, the relevant Ulta Beauty business unit, founders and/or leaders of our portfolio companies frequently engage with the corporate development team so we can continuously look for ways to support them in their journey. We take time to nurture these relationships meaningfully.

One of the consistent challenges I hear from Corporate Development professionals is with deal origination. What’s your approach to deal origination and any best practices you can share?

When it comes to our proactive origination strategy, our approach is very systematic. Everything starts with our enterprise focus as defined in our long-term strategy and our Digital Innovation Roadmap. From there, we map the landscape to better understand relevant offerings and innovations across companies in the space. Finally, we reach out to potential partners to initiate a process, further prioritize, and determine actionability and fit for Ulta Beauty.

In addition to proactive origination, we always leave space for opportunistic review of select deals that come to our desks.

In terms of best practices, because our investment strategy is very much linked to our enterprise strategy, it is important that every partnership have a designated corporate sponsor so we can partner to clearly articulate what success looks like for each portfolio company.

What’s your assessment of the current M&A market, specifically the impact on corporate M&A?

The global M&A market flourished in 2021, reaching an all-time high of almost $5 trillion dollars, driven both by deal size and sheer volume. This was true across geographies, industries (although healthcare was particularly strong) and acquirer type (i.e., PE/VC, corporations, etc.).

The outlook for 2022 is more complex given inflationary pressures driving central banks across the globe to increase interest rates, ultimately pulling down valuations and increasing the cost of debt. On top of that, increased geopolitical risks, regulatory scrutiny and overall macro uncertainty further contribute to the challenge.

For Corporate M&A and Corporate Venture Capital in particular, which also had a record year in 2021, the answer is more nuanced. The fundamentals of the market are the same but some longer-term strategic shifts may offset overall short-term headwinds such as increased digitalization and supply chain upgrades. For Ulta Beauty, our Digital Innovation Fund focuses on areas most important to our guests such as personalization, tech-enabled beauty, and ecommerce, among others.

Most memorable M&A story (can be most successful, funny, best learning experience etc):

For me, the biggest learning is that the world is a small and you should always (always) treat others with respect and professionalism, even when negotiations get tough.

Over and over again, I find the investors and leadership teams I interact with become future advocates and, in some cases, even friends. For example, the CEO of one company we partnered with, unexpectedly referred me to Chief, a private network designed to support women in reaching high responsibility positions. Some counterparts have become professional friends of mine and I so appreciate the opportunity to build a personal yet professional circle where we feel comfortable bouncing ideas off each other relative to best practices and professional advice. Interestingly, these examples include people who I had heated discussions with when we were on the opposite side of the table, but those discussions were always fair and respectful, ultimately driving mutual professional admiration.

About Lion Equity Partners:

Lion Equity is a Denver-based private equity firm founded with the core purpose of helping companies meet strategic divestiture objectives. The Partners of Lion Equity have significant experience acquiring corporate divestitures and the overall M&A process.

Why do corporations divest non-core divisions to Lion Equity:

• Proven track record of executing complex carve-outs from sellers, including Bed Bath & Beyond, Siemens, Pitney Bowes, Sodexo, The Washington Post and others;
• Demonstrated ability to execute time-sensitive carve-outs requiring speed and certainty of closure;
• Committed to flexible structures that meet seller’s divestiture objectives;
• Dedicated to seamless transition through a unique understanding of the specific issues involved both during due diligence and post-closing working with Seller, employees, customers and suppliers.

To discuss a corporate carve-out transaction, please contact: