Greg Glassman, Founder of CrossFit To Sell Business to Eric Roza, a CrossFit Affiliate

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.”

F45 Training To Be Acquired by Crescent Acquisition Corp

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.

Jackim to Speak at 2020 Sport & Social Industry Association Conference

Rich Jackim, a Managing Partner at Sports Club Advisors will be speaking to owners of sports and social clubs at the 2020 Sport and Social Industry Association Conference to be held in Cancun, Mexico in February.

Rich will share information about the mergers and acquisitions market for sports and social clubs.  He will also discuss how to value a sports and social club and over a dozen things that can be done to enhance the value of a sports and social club.  As part of his presentation, he will be sharing details of two transactions in the sports and social industry that he was involved in and the lessons that can be learned, as buyers or sellers, from those transactions.

Rich Jackim has been involved in four transactions in the sports and social industry, including two on the sell-side and two on the buy-side.  He has also prepared valuations for four other sports and social clubs.

Rich is the author of the critically acclaimed book, The $10 Trillion Opportunity: Designing Successful Exit Strategies for Middle Market Business Owners, which was an Amazon Best Seller the year it was published.

Leading Clubs report 5.3% revenue growth and 2.8% membership growth

According to the  2018 IHRSA Profiles of Success report, the health & fitness club segment posted revenue growth of 5.8% and membership growth of 2.8%.

A total of 115 firms, representing 12,289 clubs, participated in the IDS. As this report will show, club performance results varied by segment. Clubs part of a chain reported greater revenue growth (+7%) than independent clubs (+2.8%). On the other hand, independent facilities posted a retention rate of 72.4%, while clubs part of a chain indicated a retention rate of 66.7%. The smallest segment of clubs generated significantly less revenue per individual member ($479.70) in comparison with larger clubs ($975.30).

Based on data gathered in the annual Industry Data Survey (IDS), the 2018 IHRSA Profiles of Success provides benchmarks and other operational and financial data for select leading clubs. Included are key metrics such as revenue, membership growth and retention, traffic, payroll, non-dues revenue, and EBITDA. Club reinvestment and profit center analysis as well as income statement and balance sheet data are also provided.

For a copy of the complete report visit the IHRSA Store.

Sports Industry Trends to Watch in 2019

According to a recent study released by Dr. Lisa Neirotti, a professor at George Washington University, travel sports or “sports tourism” is an $8-billion industry that accounts for 14% of all tourism.  As a parent with two children who competed at the national level in high school, a good share of our time and household income was spent on traveling to tournaments around the country. But sports tourism doesn’t stop with youth sports.  The adult travel sports segment is growing too as seen by record numbers at regional marathons and tennis tournaments around the country with many adults traveling long distances to compete.

Sports Club Advisors believes there are 10 trends that will affect the future of the travel sports industry in 2017 and beyond:

#1 – Facility Development. Designing and building a “premium” facility is becoming increasingly important to make the experience memorable and enjoyable for all participants, from athletes to spectators.  The recent development of premier indoor and outdoor soccer facilities around the country is evidence of this.

#2 – Ownership Structures. In the past local communities, sports commissions, or counties have financed, owned and operated facilities.  However, increasingly, we are seeing that well-run privately operated sports facilities create better overall experiences and are more successful.  We expect more public-private partnerships to develop over time.

#3 – Social Media. Social media is not just for marketing events. It has become a tool to provide real time updates and highlights during events, changes in schedules and VIP sightings. Due to flexibility, convenience and cost, apps have replaced the printed flier or guide.

#4 – Volunteers. Many events are run by a combination of paid employees and volunteers.  A pending lawsuit filed by a volunteer alleges she should have been paid for her work at a sporting event. The outcome of this case could have massive implications on the way events are organized and staffed, not to mention the economics of sporting events.

#5 – Partnerships.  We are increasing seeing groups partner to create a world class sporting venue.  Public private partnerships have been around for a long time, but we are now seeing partnerships between owners and concessionaires, service providers, sponsors, sports equipment manufacturers, etc.  We expect this trend to continue.

#6 – Sponsors. In the long-term, sponsor involvement is more important than a sponsor’s money. It is arguably more valuable to have the Chicago Cub’s name associated with a baseball tournament or camp than to have their financial support.  Through well planned involvement, the sponsor will get more out of the experience and so will you. Get to know your sponsors and let them get to know you before you ask for money.

#7 – Bid Fees.  Host cities are less willing to pay bid fees, and are instead looking for a financial partnership with event organizers. This shared risk-reward model is becoming more common every day. In addition to diversifying risk, many host cities want a share in the financial results (just the upside) of the events they host.

#8 – Housing. Securing adequate hotel space for events and negotiating rebates and commissions with hotel operators is likely to become more of a challenge.  At least one major hotel brand is exploring capping commission and rebate programs. The challenge of protecting rate integrity and of tracking room blocks and rebates (especially in smaller communities) may force the industry to revisit how housing is secured for travel sports events.

#9 – Helping Others. The most successful events have a charitable side to them that make participants feel good about competing.  From charity runs to playground clean-ups these events do well by helping others. The question is, “How can we engage our target market and create a positive impact on our community.”

#10 – Creating Experiences. The NCAA Women’s Final Four slogan, “It’s More Than Three Games” says it all.  Athletes, young or adult, and spectators at events want their trips to be an experience for the entire family.  That means event organizers need to plan supplemental activities for family members to do (apart from the sporting event or competition) that will create memories.  This is equally true for world-class running events to youth travel gymnastics tournaments.  The more you invest in creating a memorable experience for all participants, the more successful your event and facility will be.

About the Author: Rich Jackim is a licensed attorney, an experienced investment banker, a sports industry entrepreneur and the managing partner of Sports Club Advisors, Inc.  Sports Club Advisors is a boutique mergers and acquisitions firm that provides financial advisory services to clients in the sports, fitness and leisure industry.  Rich may be reached at rjackim@sportsclubadvisors.net.

Sports Club Advisors to Attend Club Industry Show

Sports Club Advisors will be meeting with clients, buyers and prospects at the CLUB INDUSTRY SHOW.  If you’d like to schedule an appointment, please Contact Us

 OCTOBER 12-14, 2016 CHICAGO, IL

Private-Equity Investors Race to Buy Yoga Studios & Boutique Fitness Chains

Several private-equity firms have been aggressively investing in boutique fitness chains, including yoga, spin and barre studio fitness centers. These moves illustrate the growing popularity to investors and consumers alike, of workout classes that aren’t tethered to traditional gyms and monthly membership fees.

In 2015 Boston-based Great Hill Partners purchased YogaWorks, which operates 29 yoga studios in California and New York, from Highland Capital Partners.  Great Hill paid approximately $45 million for the company, according to people familiar with the deal.

Also last year, CorePower Yoga received an investment from private-equity firm Catterton Partners, which enabled them to add about new 20 locations. CorePower Yoga now operates about 100 yoga studios around the U.S.

“Right now we are seeing a shift away from traditional gyms towards more specialized programs, as consumers want their workout routines to be more fun and engaging,” said Sports Club Advisors partner Rich Jackim, who added that his firm’s research indicates that yoga and boutique fitness class attendance is up 12% over a year ago.  Sports Club Advisors is an M&A firm that puts together deals in the health, fitness and sports club sector.

Jackim said buyers like boutique fitness clubs that offer unique programming and have strong brand recognition. For example, YogaWorks, in addition to its studios, also runs a yoga school that has trained thousands of yoga instructors worldwide, according to its website.

Private-equity firms often buy companies to serve as “platforms”, which they then grow aggressively by making a series of add-on acquisitions over 4-6 years, before selling or taking the company public. With Great Hill’s acquisition of YogaWorks, Jackim said he expects to see a consolidation in the yoga sector over the next five to six years.  Right now, the yoga sector is highly fragmented with between 7,000 and 9,000 yoga studios in North America, most of which are independently owned and operated.

Investors are also racing to close deals in other areas of the fitness sector in addition to yoga.  In April last year, private-equity firm Catterton Partners, the firm that invested in CorePower Yoga also invested in the indoor cycling studio, FlyWheel. Flywheel’s main rival is SoulCycle, whose parent, Equinox Fitness, is owned by a private-equity group called Leonard Green & Partners.

Flywheel also offers a ballet-inspired class known as FlyBarre that’s similar to one offered by Pure Barre, which is backed by South Carolina-based buyout firm WJ Partners.

According to Sports Club Advisors the number of new locations that boutique fitness chains have opened has increased by 450% between 2010 and 2015. That makes boutique fitness chains the fastest-growing segment of the $22-billion-a-year U.S. health-club industry, according to the mergers and acquisitions firm.

“We’re seeing a good response from the private-equity community when successful boutique fitness clubs are finding a financial partner to provide growth capital and accelerate their expansion plans,” said Jackim. “There is significant capital available for proven fitness industry entrepreneurs, the challenge is finding the right partner and negotiating the right terms.”

Sports Club Advisors is a mergers and acquisitions firm that advises clients in the sports, fitness and leisure industry.

From Professional Sports to Private Equity: A Few Athletes Who Made the Cut

Ever wonder what professional athletes do when it’s time to retire before they’re 40?  With the competitive drive to win, combined with lots of free time and, usually a very healthy balance sheet, for many the answer is to pursue a second career as an entrepreneur or in private equity.

In this post we take a look at a few professional athletes who have retired and made the cut to get into the exclusive world of private equity.  Among those who have made the move are one of the greatest goalies in NHL history, a two-time NFL MVP, and a member of the 1992 Dream Team to name a few.

Gary Fencik—Partner, Head of Business Development at Adams Street Partners

After a rewarding career as a safety for the Chicago Bears during the ’70s and ’80s, Gary Fencik was a member of one of the most powerful defenses in NFL history. Now he’s in charge of business development for a private equity firm with more than $27 billion in assets under management .

Steve Young—Co-Founder, Managing Director at HGGC

As an NFL quarterback, Steve Young was a two-time MVP who won three Super Bowls with the San Francisco 49ers. After retiring in 2000, he earned a law degree, tried politics and helped launch a successful private equity firm. HGGC has more than $2.4 billion in assets under management with a portfolio that includes tech companies like Selligent and Serena.

Kerry Kittles—Associate at Ledgemont Capital Group

The former NBA wing took a bit of a different path to Wall Street. Rather than founding his own office, Kittles went back to get his MBA at Villanova (the same school where he played college basketball) before catching on as an associate at Ledgemont. Kittles is also an advisor to Fantex, a platform that lets users trade stock in the brands of professional athletes.

David Robinson—Co-Founder at Admiral Capital Group

A 7-foot-1 NBA champion, Robinson retired from professional basketball and jumped into the private equity field by co-founding Admiral Capital Group, an investment group focused on real estate but with investments in companies like online ticket marketplace ScoreBig and sporting goods retailer Academy Sports + Outdoors.

Detlef Schrempf—Partner at Coldstream Capital Management

A native of Germany, Schrempf spent much of his basketball career in the Pacific Northwest and now works for Bellevue, WA-based Coldstream Capital. After joining the firm in 2007, the former three-time NBA All-Star has worked primarily in business development; sourcing new deals for his PE firm.

Muhsin Muhammad—Managing Director at Axum Capital Partners

Instead of catching passes, Muhammad, a former NFL wide receiver, is now sourcing deals, making investments and helping manage a portfolio companies at Axum, a private equity group based in North Carolina. During his pro football career, Muhammad was probably best known for his 85-yard catch in Super Bowl XXXVIII which is still the longest touchdown in Super Bowl history.

Mike Richter—Founder, Managing Partner at Healthy Planet Partners

Many consider Mike Richter, a member of the U.S. Hockey Hall of Fame, to be one of the best goalies in history.  Each year the NCAA awards the best goalie in men’s hockey the Mike Richter Award. Mike has been busy in retirement, earning a degree from Yale, getting involved in politics, and starting his own environmentally focused private equity group called Environmental Capital Partners.

Zoltan Mesko—Former Intern at Graham Partners

Zoltan Mesko, the Romanian native and former New England Patriots kicker has an interesting story. During the 2011 NFL lockout, the University of Michigan graduate worked for the private equity firm Graham Partners. Mesko took what he learned there and now that his playing career is over, is working at IBM in its Business Intelligence & Predictive Analytics division.

Why Investors Love Health & Fitness Clubs

The fitness, sports and health club sector has been attractive to buyers and investors for a long time. As proof, valuation multiples for health and fitness clubs tend to be higher than for traditional retail or leisure-related businesses and are currently at an all-time high.

Based on conversations with hundreds of buyers, we have distilled the top four reasons buyers and investors find the sports, fitness and leisure sector to be so attractive.

1. Low Volatility. Historically, the fitness industry has been resilient during economic slowdown. While many retail and hospitality businesses experience significant contractions during a slowdown, the health & fitness club sector has proven to be more insulated from macroeconomic factors. To be specific, when the U.S. economy is strong, same-store sales at many established clubs have increased at an average of 4% to 6% per year; and when the economy is weak, same-store revenues at most clubs continued to increase a rate of 2% to 4% per year. However, major economic setbacks like the 2008–2010 recession still had a material impact on the fitness club industry, albeit to a lesser extent than other retail and leisure related businesses.
2. Growing Market. Overall fitness club membership has been increasing steadily for decades.  This trend is expected to continue to increase as an aging population realizes the importance of exercise and there is increased awareness that physical inactivity and obesity are a growing healthcare challenge.
3. The Business Model is “Scalable”.  To buyers this means that once the business model is proven on a small scale, it can be expanded easily and working capital requirements do not increase significantly.  So for example, once you have proven your club is profitable with 1,000 members it’s relatively easy to grow to 5,000 members without a requiring proportional investment in working capital.
4. Above Average Cash Flow. The fitness club sector generates attractive “free cash flow” compared to other businesses. Free cash flow can be defined in a number of ways. Usually it’s defined as cash flow after all operating expenses (including rent and/or debt service), interest expense, taxes, maintenance CAPEX, and working capital investment. Using this definition, free cash flow generated by most retail businesses is between 2% and 6%. However, in the fitness club sector, average free cash flow is more typically between 5% and 12% range, with some well-run operations exceeding this range.
5. Recurring Revenue Model. The most common reason buyers say they like fitness clubs is because the business model generates “annuity-like” revenues. In most retail, sports, and leisure-related businesses, once a customer pays for a product or service they have no further financial commitment. However, in the fitness club industry, when a member joins a club they agree to pay every month, irrespective of variations in season or club usage. Despite the fact that a significant percentage of members (35% to 45%) continue to pay only for a relatively short time (three to 11 months), a significant number of members (40% to 50%) continue to pay their monthly dues month after month, and year after year. Buyers particularly like the fact that many well-run clubs have 50% or more of their members who have been members for three years or longer.

Right now it’s a seller’s market. There are relatively few well-run clubs available for sale compared to the level of demand. As a result, valuations for health & fitness clubs are up 25% over where they were three years ago. To understand the value of your club, request a Free Opinion of Value today.