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As chairman, Mr. Taylor was responsible for Minnetonka's
strategic acquisitions.8 In 1985, when JPMS' sales approximated
$10 million, a financial adviser to JPMS solicited Mr. Taylor's
interest in acquiring JPMS. However, Minnetonka determined that
JPMS was too small and that the Paul Mitchell brand name was not
strong enough to stand on its own; accordingly, Mr. Taylor declined
to enter discussions at that time.
Two years later, Minnetonka targeted the salon industry for
acquisition candidates, and Mr. Taylor contacted Redken, Sebastian,
and JPMS. During this time, the annual sales of these companies
were approximately $120 million, $60 million, and $50 million,
respectively. Although Minnetonka agreed to acquire Sebastian for
$100 million in late 1987, the sale was not consummated.
Mr. Taylor initiated discussions with Mr. DeJoria in the fall
of 1987 (JPMS' 1988 fiscal year) when JPMS' sales were
approximately $50 million. Mr. Taylor informed Mr. DeJoria that
8 Mr. Taylor was involved in the August 1987 sale of
Minnetonka's liquid soap business to Colgate-Palmolive Co. for
$60 million, the November 1988 acquisition of the Vitabath
business from Quintessence for $38 million, and the July 1989
sale of Minnetonka to Unilever for $376 million at approximately
two times sales. When the Unilever acquisition was announced the
price of Minnetonka stock was at $14 per share, and the
transaction was consummated at $22.50 a share, a 60-percent
premium over the freely traded value.
Mr. Taylor used two "rules of thumb" with regard to the
valuation of a company under consideration for acquisition: two
times sales and/or five times operating income. Mr. Taylor
measured these rules against other standards, such as potential
for future growth, quality of management, capital requirements,
and strength of brand name.
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