Greg Glassman, who founded CrossFit in 2000, is selling the business to Eric Roza, according to a June 24 announcement on Twitter by Dave Castro with CrossFit. CrossFit has 15,000 locations in 158 countries. Roza is a CrossFit affiliate who owns a CrossFit box in Boulder, Colorado. He previously owned Datalogix, a tech company.
The sale is expected to be completed in July. The purchase price was not revealed.
CrossFit and Glassman have faced mounting criticism from multiple groups over the last few months for Glassman’s racist and insensitive comments he made on Twitter and in a company Zoom call related to the death of George Floyd, the unarmed black man who was killed by a police officer on May 31. Glassman has also been the subject of several stories, including one in the New York Times, that alleged he sexually harassed women on the staff.
Glassman founded CrossFit along with his wife at the time, Lauren Jenai. The two have since divorced, and as part of the divorce settlement, Glassman paid Jenai $20 million for her part of the company, becoming sole owner.
On Twitter, Glassman wrote: “The world has changed, but the magnificent human machine, the proven benefits of CrossFit, and its market opportunity remain unchanged. It is time for the founder to bid adieu and find other creative outlets. I have complete faith that Eric Roza can shepherd CrossFit Inc. effectively into this new world.”
Roza posted a statement to Instagram that said, in part:
“In the past weeks, divisive statements and allegations have left many members of our community struggling to reconcile our transformative experiences in the local box with what we’ve been reading online. My view is simple: Racism and sexism are abhorrent and will not be tolerated in CrossFit. We open our arms to everyone, and I will be working hard to rebuild bridges with those whose trust we have lost.”Read More
F45 Training, Los Angeles, is being acquired by Crescent Acquisition Corp., and taken public according to an announcement issued by Crescent Acquisition. Crescent Acquisition is a publicly-traded special purpose acquisition company. The combined company will trade on NASDAQ under the name F45 Training Holdings Inc.
F45 operates a nearly 100 percent franchise model. In its seven years of operation, F45 has more than 1,993 franchises sold in 53 countries and 1,240 studios open in 40 countries as of March 31, 2020, according to a presentation on June 24 by the executive team of F45 Training and Crescent Acquisition Corp.
The company has 847 franchises in the United States and 377 studios operating before COVID-19. Sixty-five percent of its units have reopened in the United States, as of June 19.
F45 Training also has 492 additional franchises in other countries with 270 locations open pre-COVID-19. Twenty-seven percent of units in the rest of the world were reopened as of June 19.
In 2019, pre-COVID-19, F45 Training’s revenue was $93 million, which was a 60 percent revenue growth year over year.
F45 Training started in Australia seven years ago but expanded to the United States, and in March 2019, the actor Mark Wahlberg became a minority interest owner.
The combined company is anticipated to have an enterprise value of $845 million and be capitalized by cash from Crescent Acquisition Corp’s trust totaling more than $250 million, assuming no public shareholders of Crescent Acquisition Corp. exercise their redemption rights, along with an incremental $50 million committed by Crescent Capital Group LP pursuant to a forward purchase agreement to acquire 5 million units of Crescent Acquisition Corp., according to the announcement.
Existing F45 shareholders are expected to receive approximately 53.3 million shares in the new company and as much as $204 million in cash.Read More
Sellers generally desire all-cash transactions; however, oftentimes partial seller financing is necessary in typical middle market company transactions. Furthermore, sellers who demand all-cash deals typically receive a lower purchase price than they would have if the deal were structured differently.
Although buyers may be able to pay all-cash at closing, they often want to structure a deal where the seller has left some portion of the price on the table, either in the form of a note or an earnout. Deferring some of the owner’s remuneration from the transaction will provide leverage in the event that the owner has misrepresented the business. An earnout is a mechanism to provide payment based on future performance. Acquirers like to suggest that, if the business is as it is represented, there should be no problem with this type of payout. The owner’s retort is that he or she knows the business is sound under his or her management but does not know whether the buyer will be as successful in operating the business.
Moreover, the owner has taken the business risk while owning the business; why would he or she continue to be at risk with someone else at the helm? Nevertheless, there are circumstances in which an earnout can be quite useful in recognizing full value and consummating a transaction. For example, suppose that a company had spent three years and vast sums developing a new product and had just launched the product at the time of a sale. A certain value could be arrived at for the current business, and an earnout could be structured to compensate the owner for the effort and expense of developing the new product if and when the sales of the new product materialize. Under this scenario, everyone wins.
The terms of the deal are extremely important to both parties involved in the transaction. Many times the buyers and sellers, and their advisors, are in agreement with all the terms of the transaction, except for the price. Although the variance on price may seem to be a “deal killer,” the price gap can often be resolved so that both parties can move forward to complete the transaction.
Listed below are some suggestions on how to bridge the price gap:
- If the real estate was originally included in the deal, the seller may choose to rent the premise to the acquirer rather than sell it outright. This will decrease the price of the transaction by the value of the real estate. The buyer might also choose to pay higher rent in order to decrease the “goodwill” portion of the sale. The seller may choose to retain the title to certain machinery and equipment and lease it back to the buyer.
- The purchaser can acquire less than 100% of the company initially and have the option to buy the remaining interest in the future. For example, a buyer could purchase 70% of the seller’s stock with an option to acquire an additional 10% a year for three years based on a predetermined formula. The seller will enjoy 30% of the profits plus a multiple of the earnings at the end of the period. The buyer will be able to complete the transaction in a two-step process, making the purchase easier to accomplish. The seller may also have a “put” which will force the buyer to purchase the remaining 30% at some future date.
- A subsidiary can be created for the fastest growing portion of the business being acquired. The buyer and seller can then share 50/50 in the part of the business that was “spun-off” until the original transaction is paid off.
- A royalty can be structured based on revenue, gross margins, EBIT, or EBITDA. This is usually easier to structure than an earnout.
- Certain assets, such as automobiles or non-business-related real estate, can be carved out of the sale to reduce the actual purchase price.
Although the above suggestions will not solve all of the pricing gap problems, they may lead the participants in the necessary direction to resolve them. The ability to structure successful transactions that satisfy both buyer and seller requires an immense amount of time, skill, experience, and most of all – imagination.
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Historians have long known the historical relevance and impact of epidemics and pandemics. Despite our various technological advances and the complexity of our society, disease can instantly change the course of history. Not having a robust global system for dealing with disease and pandemics comes with a hefty price tag. In the case of the COVID-19 economic crisis, the price tag will no doubt be in the trillions.
You can’t control what has happened, but you can focus on what to do when the pandemic is over and life begins to slowly return to normal. In his recent article, “How to Hit the Ground Running After the Pandemic,” author Geoffrey James explores what businesses need to do to jumpstart their operations once the pandemic is in the history books.
James wants his readers to understand that the pandemic will end and that business owners need to be ready to charge back in when the pandemic is over and the economy rebounds. As James points out, if history is any indicator, the economy will eventually rebound.
Almost everything about this economic downturn is unique. Take, for example, the fact that the U.S. has just seen its largest-ever economic expansion. The gears and wheels of the economy were spinning along quite quickly before the pandemic hit. This could help restart the economy faster than in past severe economic downturns. In short, many experts feel that this particular economic downturn could be short, but of course, this is speculation. There is no way to know for sure until COVID-19 is in the rearview mirror.
James correctly asserts that businesses need to put together a plan for how they will get up and running as soon as the pandemic is over. His recommendation is to divide your plan and thinking into four distinct categories: Facilities, Personnel, Manufacturing, and Marketing.
Each of these categories has three key questions that business owners should be asking themselves so that their businesses are ready to hit the ground running when COVID-19 is over. Below are a few of the key questions James recommends asking.
- How can we create the most sanitary and disease-free workplace possible?
- Which employees will continue to work from home?
- When there’s a spike in demand, how will we ramp-up?
- What will be our “We’re Back!” marketing message?
The pandemic caught everyone except the experts off guard. Moving forward, business leaders, think tanks, and politicians alike need to work to develop and implement robust plans to minimize the damage caused by pandemics. Humanity, and business, has been “lucky” several times in recent years, as we dodged bullets ranging from Ebola to SARS.
As James points out in his article, “Failing to plan is planning to fail.” Businesses need to plan for the recovery and they need to plan for another pandemic because another one is quite possible especially if better planning and decision making are not firmly entrenched in place.
The post Getting Back to Business After the COVID-19 Pandemic appeared first on Deal Studio – Automate, accelerate and elevate your deal making.