The fitness club industry saw little movement in the area of acquisitions during the recession as many small club operators closed their businesses because they were either not well capitalized, were not well run or could not find buyers. However, at the end of 2011, large, well-capitalized companies such as LA Fitness, Irvine, CA, Life Time Fitness, Chanhassen, MN, and Equinox, New York, began purchasing clubs from struggling companies. The differences in the situation between these groups may lead some to believe that the industry is heading toward two separate groups: the haves and the have-nots.

A Gallup poll in late 2011 revealed that 58 percent of Americans do not believe the country is divided into haves and have-nots. That compares to a 49-49 percent split on the same topic in summer 2008 as the country was headed for a recession. Despite these numbers, another Gallup poll shows that more Americans feel that their personal financial situation is getting worse, which could have a negative effect this year in the fitness industry. Just as they did during the heart of the recession, members may choose to forego their membership. If more members cancel, more clubs will struggle. With the economy not expected to turn around anytime soon, club operators also will find it difficult to seek financial assistance from banking institutions.

LA Fitness, Life Time and Equinox have no such difficulty. LA Fitness is backed by a group of private equity firms while Equinox is owned by The Related Companies, a real estate development firm. Life Time Fitness is a public company that had anticipated generating at least $1 billion by the end of 2011.

“Cash has always been king for the last three years,” says Rick Caro, president of Management Vision, New York. “Those people who have cash and have resources, even if it’s a two- or three-club group, they can access attractive real estate deals and obtain favorable debt financing based on their track record that others can’t do.”

On the flip side, the sale of 171 Bally Total Fitness clubs to LA Fitness greatly reduced Chicago-based Bally to 99 clubs, and Bally could sell off more of its clubs. Lifestyle Family Fitness, St. Petersburg, FL, sold nine clubs to Life Time Fitness and closed its remaining clubs in Indiana, Ohio and North Carolina, reducing its size from 55 to 33 clubs. The Sports Club Co., Los Angeles, is no longer part of the health club industry after it sold off its remaining four clubs to Equinox.

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