A “SPAC” Focused on the Direct Selling Industry
While the vast majority of direct selling companies are privately-held, family-run entities, the principals behind Direct Selling Acquisition Corp. (NYSE: DSAQ.U) or (“DSAC”) are looking to shake up that traditional model by providing a high-quality, high-performing direct selling company with the opportunity to access the public markets.
On September 28, 2021 DSAC closed its initial public offering (“IPO”) and now trades on the New York Stock Exchange under the symbol DSAQ.U. The base $200 million offering was more than three times oversubscribed and was increased to $230 million based on the underwriters’ full exercise of their 15% overallotment option.
A SPAC, or Special Purpose Acquisition Company, essentially operates as a shell company, formed by a combination of investors and operators, to raise capital from investors through an IPO. The SPAC’s ability to do this is generally based on the reputation of the SPAC team or a particular investment thesis. Because SPACs are often less expensive and faster than traditional IPOs, they have become a popular method of raising capital and accessing the public markets. In fact, cnbc.com recently called SPACs one of Wall Street’s hottest trends.
SPACs have evolved into a highly efficient and effective vehicle for providing companies with access to the public equity markets. SPACs are no longer considered vehicles to acquire businesses. Instead they function similarly to a reverse merger where the pre-existing shareholders of the target company can remain the largest shareholders in the public company post-merger. In other words, pre-merger ownership often maintains control of their company, with the SPAC providing capital and expertise to support the company in its growth.
One of the unique aspects of a SPAC is that when it raises capital, the investors buying into the IPO do not know what the eventual target company will be—that’s why SPACs are sometimes referred to as “blank check companies.”
A Growing Trend for Investors
Recent companies outside of direct selling that have gone public through a SPAC include Virgin Galactic, SoFi Financial and Draft Kings. There’s also a recent and very successful example of a direct selling company going public through a SPAC, Betterware de Mexico.
Betterware is the leading direct selling company in Mexico with a network of over 65,000 distributors. It completed its SPAC merger in 2020. The capital from the merger allowed Betterware to invest in a broad range of growth initiatives. As Luis Campos, Executive Chairman of Betterware explains, “We remain focused on our three strategic pillars of product innovation, technology and business intelligence.” Betterware also successfully expanded into Guatemala and plans to open in additional countries throughout Central and South America in the future.
From the time of its SPAC merger close in Q1 2020 to the end of the year, Betterware de Mexico shares were up 297 percent. This was the best performance of all the SPACs that completed a deal in 2020 for the period of merger close to the end of the year.
A SPAC Solely Focused on Direct Selling
Based on existing trends and these successful examples, DSAC is focused solely on facilitating the transition of a high-performing private direct selling company to the public market. DSAC is led by some of the biggest names in direct selling—a connected and reputable group of C-level executives with a combined 180 years of leadership experience.
DSAC plans to focus their search on domestically-based businesses within the direct selling channel. By leveraging their vast experience and unparalleled relationships, DSAC seeks to help founders/owners capitalize on significant growth opportunities within the direct selling channel.
DSAC’s Chairman and Chief Executive Officer Dave Wentz calls this a watershed moment for direct selling. “The current growth in direct selling makes the timing for this launch ideal. There are several companies we feel could do tremendous things with the infusion of capital and shareholder value going public brings,” he says. “We are excited about the opportunity to help a strong, successful private company become a great public one.”
A Strategy Focused on Opportunity and Growth
Using the above criteria, DSAC has identified a number of privately held direct selling companies they believe can benefit from going public. DSAC believes its unmatched combination of industry experience and connections makes them a preferred partner for these potential target companies. Some of DSAC’s differentiators include:
Due to the strong connections and relationships held by the management, board of directors and sponsor team of DSAC, as well as the group’s decades of relevant experience, they are well positioned to provide tremendous value and support to the extent it is desired or needed by a partner company. In addition, DSAC is familiar with the business and opportunities of many companies within their target universe. This wealth of knowledge will allow the team to move quickly and confidently through the evaluation process and provide advisory assistance as the company prepares to go public.
Most direct selling companies are self-funded, thus diminishing the need for these companies to develop relationships with the financial community. As a result, liquidity and growth capital opportunities are underutilized more often than not. As Special Advisor Ryan Bright says, “We have long believed that direct selling companies are underserved by capital markets, which is a core pillar of DSAC’s thesis. We believe that our expertise, reputation and relationships will help bridge that gap. DSAC is the perfect vehicle to help a great company gain access to public capital and the additional growth opportunities that capital provides.”
Reputation and relationships
The leadership of DSAC is well known and highly respected throughout the channel. “Our team is likely the most connected group in the direct selling industry worldwide,” explains Stuart Johnson, DSAC Special Advisor. “Direct selling is a people business—and we already know the people leading these companies. There is a lot of mutual trust, admiration and respect already in place.”
Growing Bigger Better Companies
The SPAC merger will likely result in an approximately $230 million capital infusion or more in the selected company. So how could that instant influx of public capital help a direct selling company scale? By allowing them to make strategic investments in specific areas in order to take their business to the next level. Amongst others, this can include investing in the following areas:
- Supply chain and distribution
- Digital transformation
- Product development and innovation
- International expansion
- Human resources
Direct selling is enjoying a resurgence in popularity and growth dovetailing with the rise of social selling and the side hustle culture. This has created a virtual army of 120 million micro-influencers utilizing direct selling to grow their individual brands and businesses organically through social media and social sharing. The dynamic of blending direct selling with direct to consumer impacts the channel more than any other single factor.
As Wayne Moorehead, DSAC’s Chief Strategy Officer, explains, “Many direct selling companies that are poised for growth need to invest in technology in order to fully realize their potential. Direct selling is blending with direct to consumer in what is evolving into a business model that can provide the best of both high tech and high touch. There is a significant digital transformation underway that is fueling growth. An infusion of significant capital could allow a target company to invest in the kinds of technologies that allow their micro-influencers to reach more customers, sell more product and build bigger, better teams.”
There are other tangible benefits to companies considering a SPAC merger as well. The short list of companies on DSAC’s target list are already successful with good cash flow and market share, but this allows them to benefit from the knowledge and experience of the officers of the SPAC. In addition to growth capital, access to the public markets provides:
- A level of liquidity not generally available to industry companies;
- A public currency to leverage for acquisition opportunities or further capital needs;
- Ability to extend management, employee and distributor loyalty and longevity through participation in stock ownership; and
- Broadened estate planning and legacy building opportunities for company ownership.
The management team and board of directors of DSAC has over 180 years of combined C-Suite experience with direct selling companies of different segments and sizes from startups to well-established brands. They know the industry inside and out and can bring not only capital but a wealth of knowledge to companies that are already performing well, ideally helping them achieve even more.
As Mike Lohner, DSAC’s President and Chief Financial Officer, explains, “I am honored to work with this extraordinary team, whose passion for and experience in the direct selling channel makes it an ideal merger partner for an industry company that can benefit from the growth capital, expertise and support that DSAC can provide. We believe our understanding of the unique opportunities and challenges of these companies is at a level that most within the investment community simply do not possess, and that could prove invaluable to founder/owners, operators, investors and the industry at large.”
Taking the Channel to New Heights
The corporate side of direct selling is often considered a mystery to outside investors and other industries. There is a distinct disconnect between what today’s direct selling companies achieve and how they operate in addition to lingering public mistrust and confusion.
In order for the channel to continue to grow, its leading companies must change the narrative with a new story of prosperity, legitimacy and innovation. DSAC promises to offer the right company the capital to improve and expand. Strong companies with strong reputations not only combat stereotypes, but edify and elevate the channel as a whole.
An Impressive Leadership Team
DSAC is led by a seasoned group of direct selling luminaries and leaders with over 100 years of combined C-Level experience in public and private companies.
Dave Wentz serves as Chairman and Chief Executive Officer. He is the former Chief Executive Officer of USANA Health Sciences. During his time with USANA, he served on the board of directors of both the Direct Selling Association and the Direct Selling Education Foundation.
Mike Lohner is the President, Chief Financial Officer and a Director. He is a highly experienced executive, board member, founder and investor in the direct selling and direct-to-consumer industries. He’s also co-founder of DOSH, a leading card-linked cash-back advertising platform.
Wayne Moorehead serves as the Chief Strategy Officer and as Director. He brings a wealth of experience in marketing, branding and direct-to-consumer to the management team. He’s a seasoned thought leader and advisor across several industries, most recently as Chief Marketing Officer for Young Living.
Stuart Johnson is a Special Advisor to DSAC. Stuart has served the direct selling channel for more than 35 years as the sole founder and CEO of Direct Selling Partners, a leading marketing services firm, as well as the founder of Direct Selling Capital Advisors. He is also the owner of Direct Selling News, a leading industry publication.
Ryan Bright is Special Advisor to DSAC. He is a partner and co-founder of Direct Selling Capital Advisors and has nearly 20 years of experience as a financial and investment executive. He began his career in finance sourcing private equity transactions.
In addition to those listed above, DSAC has the following independent directors:
John Addison, former Co-Chief Executive Officer of Primerica, Inc. and currently the Chief Executive Officer of the Addison Leadership Group.
Bradford Richardson, former president of Shaklee International. He has spent 20 years of his 30+ career aggressively scaling direct selling companies globally.
Travis Ogden, currently serving as the Co-Founder and Chief Executive Officer of Oola Global, a personal development company serving the direct selling channel.
Heather Chastain, Founder and Chief Executive Officer of Bridgehead Collective, a consultancy focused on assisting direct selling companies scale.