Avon’s sudden hiring of Sherilyn S. McCoy as CEO – almost certainly intended to thwart any takeover attempt by Coty – indicates that the smaller suitor will have a fight on its hands to acquire the giant direct sales company.

Coty would be better off letting this one get away. Its $10 billion offer for Avon is the biggest and most recent effort in its aggressive quest to become one of the world’s major beauty companies – in other words, to play with the big boys. The company has spent over $2 billion on acquisitions in the past two years, including $400 million for TJ Holdings, a Chinese skin care company, and a reported $1 billion for the skin care company Philosophy.  They also picked up nail color maker OPI and Russian brand Dr. Scheller Cosmetics.  Some industry leaders think they have seriously overpaid.  Are they about to do it again?

Avon is a disaster, but Coty (not to mention many on Wall Street) is focused on its worldwide network of 6.5 million sales reps and its big presence in Brazil.  Add some internationally known products to Avon’s product mix and the reps will sell them like crazy. The thought process taking place around that? Synergy, synergy, synergy.  The old school synergistic proponents are drooling.  But drool rarely translates into sales. It can, however, translate into paying too much for an acquisition.

There are questions about the distribution network Coty is so hot to get.  Some believe Avon has drifted off into the Amway multi-level marketing or pyramid model, which counts as revenues the products and promotional materials newly hired sales reps are induced to buy. So, why not hire more reps? A growing share of the company’s revenue, this might in fact be a strategy to offset declining consumer demand.  Avon is losing nearly half of their reps every year. This forces them to troll for and spend most of its advertising dollars for new reps instead of doing heavy consumer marketing to keep the Avon brand brightly lit. In the meantime, traditional Avon sales are slumping.

Coty obviously has access to a mother lode of money, so funding the deal will not be a problem. The banks reportedly still think Avon is a viable company and, if well-managed, can be fixed. The timing is right for Coty and a godsend for Avon.

It’s documented that Coty and Avon have been talking for a while. First it was going to be Avon owning Coty in a stock deal. Now’s it’s Coty owning Avon in a cash deal.

It looks like Coty announced its $23.25 a share offer for Avon to tease out any interest from a giant like Proctor and Gamble, or some large Brazilian company.

If not, then Avon will have to very seriously consider Coty’s offer.  Time is not on Avon’s side. As new CEO Sherilyn McCoy takes over from lame duck CEO Andrea Jung, she walks into a nightmare of bribery accusations in China and other developing markets, slumping sales, a weak senior executive lineup and massive legal fees that are bleeding company profits.

Given all of Avon’s current problems, a thorough due diligence of the company could be very interesting indeed. Imagine what could be lurking in the many closets of such a big, loosely-managed company with so many divisions!

Stay tuned.  As one industry observer said, “They are dancing on the porch now. However, Avon has had other suitors dancing on its porch before, and thus far hasn’t let anyone inside the house. ” Coty’s drive to become an industry giant could become a giant handicap if it results in the purchase of a very expensive, unfixable company.

Time to blow the train whistle long and loud. Hope it’s heard in the Coty executive suite.