Sally Beauty Supply 2011 Annual Report Download - page 35

of operations. For example, such conflict could cause some of our current or potential internet customers
to consider competing distributors of beauty products. These events could have an adverse effect on our
business, financial condition and results of operations.
We may not be able to successfully identify acquisition candidates or successfully complete desirable acquisitions.
In the past several years, we have completed multiple acquisitions and we intend to pursue additional
acquisitions in the future. We actively review acquisition prospects which would complement our existing
lines of business, increase the size and geographic scope of our operations or otherwise offer growth and
operating efficiency opportunities. There can be no assurance that we will continue to identify suitable
acquisition candidates.
If suitable candidates are identified, sufficient funds may not be available to make such acquisitions. We
compete against many other companies, some of which are larger and have greater financial and other
resources than we do. Increased competition for acquisition candidates could result in fewer acquisition
opportunities and higher acquisition prices. In addition, we are highly leveraged and the agreements
governing our indebtedness contain limits on our ability to incur additional debt to pay for acquisitions.
Additionally, the amount of equity that we can issue to make acquisitions or raise additional capital is
severely limited. We may be unable to finance acquisitions that would increase our growth or improve our
financial and competitive position. To the extent that debt financing is available to finance acquisitions, our
net indebtedness could increase as a result of any acquisitions.
If we acquire any businesses in the future, they could prove difficult to integrate, disrupt our business or have an
adverse effect on our results of operations.
Any acquisitions that we do make may be difficult to integrate profitably into our business and may entail
numerous risks, including:
• difficulties in assimilating acquired operations, stores or products, including the loss of key
employees from acquired businesses;
• difficulties and costs associated with integrating and evaluating the distribution or information
systems and/or internal control systems of acquired businesses;
• expenses associated with the amortization of identifiable intangible assets;
• problems retaining key technical, operational and administrative personnel;
• diversion of management’s attention from our core business, including loss of management focus on
marketplace developments;
• complying with foreign regulatory requirements, including multi-jurisdictional competition rules
and restrictions on trade/imports;
• enforcement of intellectual property rights in foreign countries;
• adverse effects on existing business relationships with suppliers and customers, including the
potential loss of suppliers of the acquired businesses;
• operating inefficiencies and negative impact on profitability;
• entering geographic areas or channels in which we have limited or no prior experience; and
• those related to general economic and political conditions, including legal and other barriers to
cross-border investment in general, or by U.S. companies in particular.
In addition, during the acquisition process, we may fail or be unable to discover some of the liabilities of
businesses that we acquire. These liabilities may result from a prior owner’s noncompliance with applicable
laws and regulations. Acquired businesses may also not perform as we expect or we may not be able to
obtain the expected financial improvements in the acquired businesses.
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