John Rochon, the former head of Mary Kay Inc., says he’s working to acquire a collection of door-to- door selling businesses that will emulate LVMH Moet Hennessy Louis Vuitton SA (MC)’s model of giving the brands’ founders independence to run their businesses.
Rochon, who has invested in RealPage Inc. (RP:US) and Dirt Devil, in August agreed to take over Computer Vision Systems Laboratory Corp. (CVSL:US) to form a vehicle for buying direct-selling companies. CVSL has buyouts with $6 billion in total sales in the works, Rochon said, declining to name them. While some deals won’t be completed, several are close, he said.
CVSL’s targets are in the health, home and beauty industries and have annual revenue of about $100 million each. Rochon said he wants the founders who had the energy and vision to build their companies to stay involved and remain the face of their brands.
“I would never let people exit a business where the business success was the very charismatic nature of the leadership,” Rochon, 61, said in an interview.
LVMH, based in Paris, is the world’s largest maker of luxury goods with 23.7 billion euros ($30.6 billion) in sales last year. The group, which owns brands including the Louis Vuitton fashion line, Moet & Chandon champagne and Dior perfumes, says on its website that it allows its companies to “exercise stringent control over every minute detail of their brands’ image.”
Rochon, who also is founder and chairman of Dallas-based Richmont holdings, mounted takeover attempts for rival Avon Products Inc. (AVP:US) in the late 1980s and early 1990s and at one point was its largest shareholder with 22 percent of the stock. Richmont was working on a proposal to buy a new stake in Avon, a person familiar with the situation said in September. Rochon declined to comment.
Rochon said direct-selling businesses have an advantage because they have been building experience with word-of-mouth, relationship-based selling long before the advent of social media. As chief executive officer of Mary Kay, known for awarding pink Cadillacs to top representatives, he expanded the brand overseas and helped boost revenue to almost $3 billion when he left the company in 2001 from about $500 million at the time he led its leveraged buyout in 1985.
Direct-selling “is doing great internationally,” and should be more successful in markets where the economy is lagging and people are motivated to earn extra money or more independence, he said.
While the industry is volatile, and annual turnover among distributors ranges from 40 percent to 90 percent, direct sales companies “can grow exponentially with very little or no incremental capital,” John San Marco, an analyst at Janney Montgomery Scott LLC in Philadelphia, said in a telephone interview.
“I can’t imagine you can’t find good, start-up businesses,” he said. “My guess is that it’s pretty fertile ground right now.”
Now is a good time for acquisitions because a generation of founders is approaching retirement and sellers are concerned about the potential for higher tax rates, Rochon said.
At Mary Kay, Rochon invested in technology, building an online community for representatives and selling other companies’ products through the Internet at a time in the late 1990s when many questioned whether online selling would kill direct businesses.
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