Gym-goers may soon begin wondering: Is my club owned by private equity firms?
The answer could be yes, if the current pace and scope of investment
in the sector is providing any guidance. Over the past week, at least
three deals have been announced involving chains from value-oriented Planet Fitness to family-friendly In-Shape Health Clubs and women-only gym clubs Pure Fitness For Women.
Private equity firms have long invested in—and profited from—fitness
clubs. The sale of Equinox Fitness, for instance, returned three times
cash to sponsors North Castle Partners and J.W. Childs Associates in
2006. Brockway Moran & Partners was an early investor in Gold’s Gym
International Inc., which the firm sold in 2004 for what was understood
to be a healthy profit.
Fitness clubs are attractive targets for leveraged transactions,
because of their steady cash flow from recurring revenue stream from
subscription or membership fees, said Dal Clayton, chief operating
officer of Titan Fitness, a Westview Capital Partners-backed platform
that acquired Pure Fitness For Women this week.
The companies also tend to have stable operating expenses, which are “fairly flat, fixed costs,” said Mr. Clayton.
Douglas Lehrman, founder and chief executive of Pulse Equity
Partners, a co-investor in In-Shape Health Clubs, said one should expect
more deals to come in the next few months.
Mr. Lehrman, who worked on the Equinox deal at North Castle and who
has been investing in health and wellness-related companies for 15
years, said that the fitness club industry is entering a new growth
phase, after going through consolidation over the past few years that
saw many mom-and-pop’s being bought by larger operations. Those that
target niche markets—In-Shape focuses on suburban families, for
example—are well-positioned to grow, creating demand for fresh capital.
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