A GHD flatiron.

Coty’s planned purchase of hair tools company GHD for more than $510 million, revealed Monday, further solidifies 2016’s reputation as a year of acquisition frenzy in the beauty world.

The appetite of big beauty companies seems insatiable, and financial sources agree it’s going to stay that way.

While firms’ desperation to do deals can have many causes, sources tended to point to two main reasons — competition and growth.

Big beauty players see their competitors make acquisitions then face pressure to execute deals of their own just to keep up. At the same time, some more established brands are faced with sluggish growth, especially when compared to the skyrocketing sales of younger ones that have a more intuitive idea of how to capture the Millennial customer, sources said.

“The biggest factor that you have with all the big corporates is their core businesses are really not growing,” said one financial source, who requested anonymity. “They’re all competitors, so there’s an element of ‘I want to get it before L’Oréal does….’ It’s reactionary yes, but do they need to react this way? Probably.”

“What has been happening recently is that the large strategic players have been looking at these sponsors buying up brands really early and then flipping them to the big guys for huge multiples,” said Ken Wasik, managing director at Stephens. “The big guys are saying, ‘Wait, why are we having these private equity firms come in and increase the valuation of the businesses?’” Instead, some larger strategic buyers are shopping further down in the market.

“If you look at people like L’Oréal, it has been very successful in buying smaller brands and then bringing giant upside by blasting them through their much larger distribution channels,” Wasik said.

A strategy like that could be partially behind Coty’s acquisition of GHD, sources said. “What we’re starting to see is Coty flexing its muscles here and doing something similar to L’Oréal,” Wasik said. The GHD purchase also bolsters Coty Professional Beauty, the segment that includes professional hair care.

“This move underlines Coty’s commitment to continually elevate professional beauty and serve salon professionals and their clients with standard-setting products and services,” said Sylvie Moreau, president of Coty Professional Beauty. “I am pleased to see these three iconic salon brands, Wella, OPI and GHD, come together under the Coty Professional Beauty division.”

For GHD, which is being sold by Lion Capital, the deal gives it access to a much larger, beauty-focused home. Lion, which currently owns Perricone, held and grew the hair tools business by 30 percent over five years, transitioning it from a single product company in one channel to a multiproduct, multichannel business. GHD makes hair straighteners, curling irons and other hair tools, and generated about $195 million in sales in fiscal 2016.

“This is a fantastic opportunity for the GHD brand and its team,” said GHD chief executive officer Anthony Davey. “The combined expertise and capabilities of GHD and Coty will be a powerful force of innovation in the hair business. Together, we will further excite and delight our existing salon partners, clients and consumers, and attract many new ones across the world.”

The financial community expressed moderate surprise related mostly to the timing of Coty’s latest deal, which was revealed just two weeks after the company closed on its $11.4 billion acquisition of 41 beauty brands from Procter & Gamble. Coty’s shares closed slightly up Monday, to $23.39.

“There [was] some speculation that they would have to have a period of digestion before they went out and did anything, and here they are, pretty close after the deal with Procter [& Gamble], here they are out doing another deal,” said Stifel analyst Mark Astrachan. “In terms of the why…I think the company’s planning on building on the platform that they acquired from Procter [& Gamble], the Wella business, and essentially sees more revenue synergies than cost synergies in terms of running what they acquired as a standalone business.”

The deal should indeed bolster Coty Professional Beauty with Wella, agreed Bank of America Merrill Lynch analyst Olivia Tong, writing, “Coty should be able to leverage its much broader salon distribution platform with Wella to immediately drive sales synergies for GHD.”

While Coty is planning on funding the deal with both cash and debt, the business is still within a reasonable debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio, Astrachan said, estimating that ratio at around three-and-a-half times. “This is management that is comfortable running with a bit more leverage,” he added. A Moody’s report issued late Monday said the acquisition is credit negative because it follows the P&G deal and creates integration risk, but added that Coty’s credit rating and outlook remain unaffected.

While Coty has been one of the more active beauty players, effectively buying itself the number-three slot as far as big beauty companies go, it is by no means the only one looking to do deals.

“Consumer behaviors and consumer preferences are changing very rapidly both in terms of what kinds of brands they’re buying and where they’re shopping and so all of these big beauty players have to rethink their go-to-market strategy and where they want to play both in terms of product categories where they feel like they can succeed and in channels of distribution,” said Vennette Ho, managing director at Financo.

To keep up, L’Oréal, the Estée Lauder Cos. Inc., Shiseido and other businesses have been racking up acquisitions of their own. Lauder is said to be looking at both Becca Cosmetics and Drunk Elephant, while having recently gone on something of a fragrance spree that most recently included the acquisition of By Kilian. Lauder’s interest in Becca specifically is said by industry sources to be spurred by L’Oréal’s purchase of color cosmetics brand IT Cosmetics, which it bought for $1.2 billion.

L’Oréal also inked deals for Société des Thermes de Saint-Gervais-les-Bains, the license to use the Saint-Gervais Mont-Blanc beauty brand and Atelier Cologne this year. Shiseido, anchored by a newly acquired prestige fragrance, Dolce & Gabbana, and the recently picked up Laura Mercier business, has even built itself a new prestige division — tapping Jean-Marc Plisson from Fresh as the head.