Mountainside Fitness Receives Private Equity Investment from PNC Mezzanine Capital
Mountainside Fitness has received a 25% preferred stock investment from PNC Mezzanine Capital to complete a minority recapitalization of the company.
According to Tom Hatten, the CEO and founder of Mountainside Fitness, the minority private equity investment will allow the company to pursue a number of potential opportunities, including expansion both inside and outside Arizona, where the company is based.
“This investment allows for more flexibility,” said Hatten. “I think you’ll see us look for opportunities to purchase other club chains, expand either within Arizona or outside of Arizona, and we’ll also have some other horizontal components that we really want to get into. It gives us some flexibility to do all of those things, without having to just rely on our balance sheet, so to speak, which is great.”
Mountainside Fitness currently has 18 clubs, making it the largest locally owned health club chain in Arizona. This is the first equity partner Mountainside Fitness has taken on over the course of its 29 years in business.
According to Hatten, he was open to the opportunity because it was a minority investment and because of the company’s strong relationship with PNC.
“I’ve never had a partner prior to this opportunity — it’s all been self-generated,” said Hatten. “We had done a deal with PNC in 2012 through mezzanine lending to fund growth as we were trying to move faster here in the state. It was a successful relationship in all forms. We kept in contact and they reached out and said they would be interested in being an equity partner in Mountainside. We’re now moving forward as partners in the business, which allows us even more capital to grow.”
According to Hatten, the partnership is unique thanks to Mountainside Fitness’ position in the marketplace as an upper-middle priced product. Overall, private equity investments taking place in the fitness industry have trended toward the lower or higher end of the marketplace.
“We’ve always played in the upper part of the middle, and PNC really liked that,” said Hatten. “I think they really fell in love with our product and how we’ve evolved over the years, and they felt like it was a good strategic play for them to be a partner with one of the few club chains in the U.S. that do play at the top of the middle.”
In addition to the partnership with PNC, Mountainside Fitness has also partnered with CIT Group, a financial institution based in New York City. According to Hatten, this further solidifies the fitness brand’s position in the marketplace.
“The three of us together — PNC, CIT and Mountainside Fitness — is a strong combination,” said Hatten. “We can kind of do our thing methodically and strategically with a very strong balance sheet moving forward.”
For other fitness brands considering taking on a private equity partner, Hatten advised taking the time to ensure it’s the right fit.
“Be very cognizant of being true to who you are and what you want your brand or business to be,” added Hatten. “Is it just about growing? Is it about getting that check? Do you want to stay involved? Do you want to have control? That was a big thing for me — I wasn’t ready to release control yet. Decide on your objectives, and make sure they’re in line with whomever you decide to partner with.”