Gold's Gym of Santa Barbara's Acquisition by Spectrum Clubs

Transaction

• SB Flex, dba Gold’s Gym of Santa Barbara, is the dominant health club operator in Santa Barbara with three locations
• Its shareholders wished to capitalize on the positive trends in health club valuations and, at the same time, were concerned about proposed changes to the Gold’s franchise agreement

Challenges

• While in discussions with potential buyers, 24 Hour Fitness announced it was entering the Santa Barbara market
  • SB Flex had not previously faced a well-heeled competitor
  • 24H’s announcement called the future financial performance of SB Flex into question, frightening some potential buyers
• Gold’s Gym International, (GGI) had a “right of first refusal” to acquire SB Flex which concerned other interested buyers

Solution

• FocalPoint ran a broad and proactive process, talking to both strategic and financial buyers
  • We found a strategic buyer (Spectrum) that did not view 24H as a “direct competitor”, and therefore was less concerned about its entrance into the market
  • We worked extensively with Spectrum and Brentwood Associates (Spectrum’s equity sponsor) pre-LOI to develop a process that they were comfortable with regarding GGI’s “right of first refusal”
• FocalPoint managed the process with GGI, clearing the way for Spectrum to close the acquisition and, hence, for SB Flex to leave the Gold’s Gym franchise system
• Ultimately, SB Flex was acquired by Spectrum at a very attractive valuation multiple