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With markets opening during the past year, private equity firms are becoming more interested in the fitness industry. Industry insiders say that the industry’s recession-resilient reputation, increased mergers and acquisitions in the industry, plus an impending capital gains tax deadline have led to more activity as 2012 heads down the home stretch.
The Private Equity Exit
Steve Tharrett, president of Club Industry Consulting, Highland Village, TX, says small and mid-sized club operators seeking an exit strategy will most likely have to partner with private equity firms to provide the capital—along with the resultant debt—to implement growth strategies.
“Whether it is a select few smaller and mid-size [clubs] who have an attractive value proposition to take to a larger market, or larger [clubs] seeking consolidation strategies or exit, private equity firms will be important,” Tharrett says.
A private equity firm might especially be important to Planet Fitness, which has shown growth in the past few years. In 2011, it had total net revenue of $136.4 million compared to total net revenue of $92.3 million at the end of 2010, according to its Franchise Disclosure Document (FDD). Net income attributable to members of Planet Fitness Holdings LLC was $26.9 million in 2011 compared to $17.7 million in 2010.
Planet Fitness reported in its FDD that it had 520 clubs at the end of 2011, a jump from 390 at the end of 2010 and 312 at the end of 2009. Of the 520 clubs in 2011, 453 were franchised clubs.
“I am hoping for the good of the industry that they do consummate the transaction,” Caro says, “and they succeed terrifically as a result with the fresh resources and grow in faster and better ways than before.”
For club owners who have not yet looked into private equity investment, it is probably too late to get a deal done by the end of this year, both Caro and Mastrov say. However, Mastrov adds, raising capital is once again a viable option for club owners, one that they should consider.