Financing Planet Fitness’ Acquisition of World Gym

Transaction

• Planet Fitness is a leading owner, operator and franchisor of ‘no-frills’ health clubs, with nine company-owned facilities and -80 franchised locations
• World Gym is a leading franchisor of ‘serious fitness’ health clubs, with one company-owned facility and approximately 285 franchised locations
• The owner of World Gym was nearing retirement and wished to sell the business, but pricing expectations were high

Challenges

• As a 35-year old brand, World Gym ownership wanted a premium price for this iconic brand that at one time was part-owned by Arnold Schwarzenegger
• There was a disconnect between the buyers’ perception of the business (i.e., iconic brand, global presence, ~280 units, etc.) and the actual financial performance of the business
  • Offered buyers a ‘royalty’ cash flow stream and under-utilized brand
  • Franchise fees were low given the minimal service provided by the franchisor
• Acquisition financing was difficult to obtain given the size of the transaction and the nature of the collateral

Solution

• FocalPoint identified the ideal buyer and presented the idea of acquiring World Gym
  • Planet Fitness had the infrastructure in place to add a second ‘brand’ to its franchising operations
  • Planet Fitness believed it could reduce the ‘churn’ in the World Gym franchisee base
• FocalPoint identified and introduced to Planet Fitness the ideal source of acquisition financing (a mezzanine lender that understood the business, was minimally dilutive, and was comfortable with the collateral)
• FocalPoint negotiated the purchase price and structure that satisfied both buyer and seller’s objectives and paved the way for a successful closing