CVSL: The Rollup Will Accelerate

Jun.27.14 | About: JRjr33, Inc. (JRJR)

Summary

CVSL: The Rollup strategy will soon gain steam.

The anticipated NYSE listing will make CVSL a more attractive suitor.

Anticipated revenue gains will be supported with bottom line profits.

John Rochon of Richmont Holdings is a proven winner.

CVSL (CVSL) is engaged in a rollup strategy of acquiring multiple companies in the direct selling or multi level marketing industry. The company strategy is to provide efficiencies of scale and management expertise to owners of direct selling companies who have discovered that starting a business and growing and operating a substantial enterprise require quite different skills.

The CVSL operating strategy is one, which encourages the entrepreneur to remain integrally involved, in much the same manner that Berkshire Hathaway seeks to maintain involvement of the seller when acquiring businesses. A key driving force in the CVSL strategy is to provide liquidity to the seller, while keeping the founders or primary stakeholders engaged in the ongoing development of the business. This strategy has been "in waiting" during the early phase of CVSL development, since the shares have been very thinly traded on the pink sheets.

The recent announcement of a Form S-1 offering being filed along with an application for listing on the NYSE changes the landscape considerably for CVSL. In a few short weeks, entrepreneurs who choose to sell into the rollup, will have liquidity. This key contributor to CVSL acquisition attractiveness has been only a concept until the pending NYSE listing.

A recent Direct Selling News article identified 100 direct selling or multi level marketing companies with annual revenues of $60,000,000 USD or greater. When one questions the validity of a roll up strategy for this industry, he need only look at the above referenced list of entities. The efficiencies of consolidation of back office functions are obvious. Each of these companies experience the expense of legal departments, IT departments, call centers and multiple layers of management. There is little about most of these functions that are unique to the individual entities. The CVSL rollup strategy, soon to be augmented by a real offer of liquidity to the company founders and primary shareholders will make possible discussions with more than a few of the companies in the Direct Selling News list.

In Q1 2014, CVSL revenues spiked six fold as a result of acquisitions. That revenue increase will pale in comparison to future increases, due to the dramatically more attractive proposal CVSL can make to acquisition candidates, once the NYSE listed shares become effectively the currency used to fund the acquisition. Top line growth is nice. Organic top line growth is even nicer. I am well acquainted with prominent members of CVSL companies. I am satisfied by conversations held with such individuals that the assimilation of the various companies is going well, and that future quarters will see top line growth of an organic nature, as well as growth provided by an accelerated acquisition schedule.

Bottom line improvements will not be far behind. My confidence in this fact is provoked primarily by my confidence in and enthusiasm for the chief architect of the CVSL plan. John Rochon of Richmont Holdings is a proven winner. Richmont publicly claims investment returns of 92% compounded internal rate of return, with over 340 completed transactions in the past 28 years.

Winners tend to win, again and again. The direct selling industry needs a bankable champion to counter the attacks of short sellers and well intended but misinformed regulators. Rochon is that man. And, he is not the lone ranger. He has surrounded himself with a star studded cast of seasoned executives.

I have been a full time industry participant for the past two and a half decades. I have been among the top producers globally on the distributor side, and I have been the president of a direct selling company with annual revenues in excess of $300,000,000.

I subscribe fully to the strategy envisioned by John Rochon and team. I am not employed by nor am I a distributor or network member of any CVSL company. I believe the rollup is working, I believe that greater success is to come than the current share price reflects. Accordingly, I own CVSL shares. I have never sold a single share, and do not intend to do so any time soon.

Disclosure: The author is long CVSL, HLF. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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