In Berrard’s eyes—Huizenga’s too— Swisher was the same game, but with a more attractive twist: It was recession-proof. Whether times were good or bad, restaurants and clinics still needed to clean their kitchens and washrooms, no matter what. Swisher items like no-rinse sanitizer, delivered to their doorstep,
were staples, not frills. It was, Berrard told The Charlotte Observer in 2007, “probably the best business I’ve ever seen.”
Huizenga, worth an estimated $2.5 billion, and Berrard, an accountant who became his right-hand man, put in $14 million to buy up Swisher. The strategy was to create a “full-service” industrial cleaning and supply firm that would provide equipment, chemicals and linens to a host of industries.
Swisher soon began gorging itself. Between 2005 and the end of 2010, the company bought back most of its franchises and took over dozens of smaller firms. It used a mixture of cash and stock—but mostly stock.
Then in 2010, one of the oddest corporate marriages to ever be consummated began to come together: In a bid to go public, Swisher merged with CoolBrands, the faded Canadian-based maker of ice cream and frozen snacks.
CoolBrands grew out of Yogen Früz, a frozen-yogurt chain started by brothers Michael and Aaron Serruya. Precocious and ambitious—Michael was 20, Aaron 18—the brothers started with a single location in a mall north of Toronto in 1986, and eventually built an ice-cream manufacturing giant, buying up famous brands such as Eskimo Pie, and boasting revenues that hit $450 million.
But a dispute with Weight Watchers over the popular and lucrative Smart Ones line of frozen treats sent CoolBrands reeling. Unable to replace one of its bestselling products, the company saw its revenue slide, then crater, amid governance and accounting problems. Soon the Serruyas were liquidating assets to keep the business afloat.
By 2008, CoolBrands was a shell of its former self, with more than $60 million in cash from its fire sale, and nowhere to invest. The stock-market listing sat in limbo as Michael Serruya pondered where to take the company next.
Enter Huizenga, who by 2010 was looking to take Swisher public, and needed a listing. The union was helped by the fact that Berrard, Byrne and Serruya knew each other from serving on a board together.
It didn’t matter that CoolBrands was a tarnished shell: A reverse merger would give Swisher a quick and easy way to tap the TSX. With big names such as Huizenga and Serruya behind it, a board that included former Florida governor Jeb Bush and Canadian senator David Braley, and a proven formula as its game plan, investors loved the Swisher story. Few questioned why an ice cream company was now cleaning toilets.
After debuting on the TSX in 2010, Swisher branched out to the Nasdaq in early 2011, trading at $6.45 a share. By April, as the firm steadily grew by acquisition, the price was climbing toward $10.50. The rise was mirrored on the TSX. Soon the company had an enterprise value of more than $1.5 billion. Swisher would soon boast more than 30,000 customers and nearly 1,600 staff.
But given the boom-and-bust record of its key executives, investors eventually began to question whether the company’s metamorphosis and its soaring stock were for real.
Jim Cramer, the excitable host of Mad Money, was asked about Swisher on air in April, 2011, prompting a puzzled look. He didn’t know much about the company, he said, but would look into it. A few days later, Cramer announced he wasn’t on board. Sure, Swisher had big names behind it. But “sometimes bloodlines aren’t enough,” Cramer said. The stock was trading at 20 times sales. “Not earnings. Sales. That’s insanely expensive,” Cramer shouted. “I wouldn’t touch Swisher with a 10-foot plunger.”
Roll-ups are risky plays. They always look good on the way up. But sooner or later, the deals run dry and revenue growth slows. The stock faces a reckoning as the deals inevitably become increasingly pricey. The company must start producing growth organically.