Whisper it quietly, but fitness is fast becoming the hottest ticket in town for many investors.
From a glut of seed-funding for imaginative start-ups, to venture capital funding for mid-sized businesses breaking out, to high-profile IPOs for some of the sector’s biggest hitters, investors of all types are turning their attention to the health and fitness industry.
As noted by Deloitte’s Karsten Hollasch last year, one of the surest signs of an attractive investment climate is a surge in the level of merger and acquisition (M&A) activity. Presenting the European Health & Fitness Market Report 2015 at FIBO, he noted that there were 19 M&A transactions alone in 2014, compared to an overall total of 24 in the three years previously. This trend is continuing to gather pace, with the forthcoming report – set to be released next month – expected to identify 22 such deals in 2015.
What type of investment?
M&A aside, we’re seeing an explosion in investments of all types across the sector, and businesses must decide which investment strategy is right for them: seed funding, crowdfunding, venture capital, private equity, IPO? What sort of investor are they looking for? How much equity in their company are they actually willing to give up?
At the entry point to the market, innovative fitness tech start-ups such as dynamic pricing platform Dibs, social workout app Fitssi and management software provider Glofox have all attracted seed-funding in recent months to accelerate their growth into new markets. Meanwhile, new players such as 1Rebel have embraced the benefits of new investment avenues such as crowdfunding to raise eye-watering sums of money in double quick time.
From a private equity perspective, established chains such as Virgin Active and Barry’s Bootcamp have sold significant chunks of their businesses to high-powered investment firms (Brait and North Castle Partners respectively) to turbocharge their growth ambitions.
But perhaps the strongest example of the fitness sector’s growing appeal lies in the number of IPOs the industry has witnessed over recent months. Following US flotations for Fitbit and Planet Fitness, The Gym Group became the first UK operator in 15 years to go public in November (see HCM Feb 16, p28) and has since seen its shares climb 20 per cent as investors have scrambled for a slice of the fitness pie. Not to be outdone, budget rival Pure Gym is now limbering up for a listing of its own, with early indications suggesting the chain could be valued at more than £500m.
“The flotation of The Gym Group has shown the appetite for investment into the physical activity sector,” concluded Mazars’ head of leisure Gareth Jones in a recent market analysis. “How the IPO assists with the expansion of The Gym Group from its current 66 sites will be keenly watched by competitors, and welcomed by those who see the huge potential of the low-cost model in driving the growth of the sector.”
A growing appetite
Clearly there’s appetite for investment in the fitness sector, and the valuable contacts and expertise that these investors bring with them can be a huge asset in scaling a business: whether you’re a small start-up or a well-established firm looking to take operations to the next level, every company needs investment to make good on expansion plans.
We speak to some leading industry figures in fitness and investment to uncover their top tips for securing funding.
