On a sunny afternoon in January, Tom Byrne stepped up to the microphone inside a ballroom at Miami Beach’s luxurious Fontainebleau resort and gave a nod to those who had stuck around late in the day to hear him speak.
It was just after 4 p.m., and many at the investor conference had already swapped their suits for flip-flops and headed poolside. But a group of investors and analysts stayed behind in the darkened room to listen to the new CEO of Swisher Hygiene.
“Thank you,” Byrne said politely to those who came, in his words, “to kind of hear an update on the Swisher story.”
It was a bit of an understatement. As updates go, this was a doozy.
In less than two years, Swisher, an industrial cleaning company, had gone from stock-market superstar to a company whose affairs were in shambles, with a share price to match.
The shares, which peaked at more than $10 on the TSX in early 2011, had tumbled to less than $2. Investors had mounted a class-action suit over alleged accounting manipulation after the company announced in the spring of 2012 it would restate several quarters of earnings. In short, all was not good.
It was a stunning turn of fortune for a company that had set out to revolutionize the germ-killing business—selling products such as foaming meat-room cleaner and non-acid soap scum remover to restaurants, health clinics, hotels, cruise ships and the like.
At its height, the men behind Swish-er—including Canadian entrepreneur Michael Serruya and H. Wayne Huizenga, the dealmaker behind Blockbuster Video—couldn’t grow the firm fast enough. In 2011, the company that made more acquisitions in North America than any other was not Berkshire Hathaway. Not General Electric. Not Google. It was Swisher, which was averaging an acquisition per week, prompting mom-and-pop investors to phone up CNBC’s popular Mad Money show, demanding to know: Should I buy Swisher?
Less than two years later, Swisher’s stock was circling the drain. For those sitting in the audience at the Fontaine-bleau, the question was obvious: What the heck happened?
Unfortunately for Byrne, speakers at the conference were allotted just 25 minutes for their presentations.
Swisher Hygiene is a new take on an old story.
In 2004, Steven Berrard, a man whose resumé was studded with stock-market success, was driving through Charlotte, N.C., when he passed the home of Patrick Swisher.
Swisher was in trouble. The founder of Swisher Hygiene had recently been in jail for tax evasion. And the shine had come off his company, which, since 1986, had sold urinal cakes to businesses and provided restroom cleaning. Berrard’s wife suggested he look into the enterprise.
After laughing off the idea—urinal cakes?—Berrard gave it more thought.
One thing was immediately clear: Swisher Hygiene lived in a fragmented industry. There was one massive North American player, Minnesota-based Ecolab, but otherwise the industrial sanitization sector was a constellation of small regional firms. Berrard saw what this meant. It was a classic roll-up opportunity: By consolidating the smaller firms, a savvy player could build scale and market share quickly, reduce the number of competitors, and squeeze out more profit by eliminating supply-chain inefficiencies.
Berrard knew this model as well as anyone. He had studied it for decades under the tutelage of his partner, serial entrepreneur Wayne Huizenga, the Florida-based king of roll-up deals.
Huizenga, a college dropout, built three Fortune 500 companies. In the 1960s, he took a one-truck trash-hauling operation and, initiating a series of more than 130 acquisitions, turned it into Waste Management, the largest disposal company in the United States.
Then, as VCRs proliferated during the early 1980s, Huizenga turned to video rental stores, investing about $18 million for a 60% stake in Blockbuster, which he grew from regional upstart to national chain by swallowing up countless smaller rivals (all currency in U.S. dollars hereafter unless otherwise noted). In the late 1980s, a new Blockbuster outlet was being opened every 17 hours.
Blockbuster was sold to Viacom in 1994 for $8.4 billion, paving the way for Huizenga and Berrard to form Auto-Nation. It quickly bought up car dealerships across the U.S. until the stock began to sour in 1999, as growth opportunities dried up.