A Roll-Up in the Making

IdeaSphere has been picking up powerful brands since 2003 and its latest agreement with Dr. Andrew Weil is no exception

By Adam Ismail

A successful roll-up has been the goal of a great number of aspiring financiers in many industries, including the nutrition space. In our industry there have generally been two strategies: acquiring companies across the value chain or acquiring a number of branded companies.

IdeaSphere, the latest company trying to become a powerhouse in this space through roll-ups, has made waves lately pursuing acquisitions and licensing agreements for several valuable properties. In many ways it has been acting like value investors, recognizing when they can pick up companies that have valuable businesses at bargain prices.

The management of IdeaSphere understands the value of brands well, including Anthony Robbins as one of its founders. Mr. Robbins turned his personal empowerment seminars into a multimillion-dollar enterprise that sells dozens of nutritional products, books, software and more, all based on the Anthony Robbins brand.

IdeaSphere’s first acquisition came in 2003 when it bought Twinlab out of bankruptcy. At its peak in 1998, Twinlab posted $282 million in sales and was one of the largest companies in the industry. It was hit in successive years with problems related to ephedra, product returns in mass channels, and the effects of planning for high growth when the industry hit a speed bump.

However, even going into bankruptcy, Twinlab had $146 million in sales and a strong brand that was recognized by consumers who had never even taken a Twinlab product. If you stripped away the majority of Twinlab’s debt, what you were left with was a great buy on the part of IdeaSphere because it was able to take advantage of the intangible value of this brand recognition.

IdeaSphere’s second acquisition was Metabolife, another company hit hard during the ephedra fallout. At first it appeared the deal was going to fall through, for what IdeaSphere said was Metabolife not executing key provisions of an agreement be­tween the companies. However, this shrewd negotiating allowed IdeaSphere to acquire Metabolife at an even lower price. Again, the main value in Metabolife was its brand, which was unaffected by Metabolife’s execution of these provisions, so by lowering the purchase price IdeaSphere essentially profited because the value it was buying remained unchanged.

Metabolife became famous through its unique retail distribution model, which created a very loyal group of followers who bought the Metabolife products not because it had ephedra, but because it worked. In fact, the reason the company did not collapse completely after the ephedra controversy could be attributed to the brand building it worked hard to create over the years. This built a core group of loyal customers, many of whom probably had no idea about any aspect of ephedra in the product because they associated with the Metabolife brand rather than its ingredients.

Now the latest deal by IdeaSphere, a licensing agreement with the renowned and well-respected Dr. Andrew Weil, has boldly underlined its strategy of focusing on key brands. Dr. Weil’s supplement line is under two years old, but the Dr. Weil “brand” is far more established and valuable. In fact, it is very similar to the Anthony Robbins brand in that it is built around the credibility of an individual.

While this was not an acquisition, it willprobably serve both parties well. Dr. Weil stands to capture more value as the line of supplements that carry his name grows, but he does not give up that future value. Had he sold his company, much of that value would have been lost because it would have been viewed as a startup company trying to expand distribution. For IdeaSphere, the agreement ties Dr. Weil to the brand even longer. Both parties have a strong incentive to grow the company through new products and distribution and an acquisition would not have accomplished these objectives.

All of these deals begs the question, in what other brands is IdeaSphere interested? There are several core brands that have already been bought and sold like Solgar, Rexall and more. Many of these may take more capital than is available to Idea-Sphere currently, but you never know. One thing is certain, its roll-up strategy is fo-cused on brand powerhouses with loyal followings, and they are picking them up at bargain prices. NW