Mindbody to buy billion-dollar fitness company, fueling talk of new IPO
EDITOR’S NOTE: This article was updated Oct. 15 with more information about the merger and an interview with Mindbody founder Rick Stollmeyer.
After a year of pandemic-related struggles in the health and wellness industry, two companies are announcing a merger just as the sector is starting bounce back.
San Luis Obispo-based Mindbody announced Oct. 13 that it will acquire ClassPass, a New York-based subscription-based fitness marketplace, after months of negotiation.
The value of the all-stock deal was not disclosed. Rick Stollmeyer, Mindbody’s co-founder and former CEO and the company’s current executive chairman, told the Business Times this deal is the biggest acquisition in the company’s history.
Mindbody also announced Oct. 13 that it had secured a strategic investment of $500 million in capital from a group led by Sixth Street.
“We are close to being back to where we were before the pandemic and in some metrics, actually exceeding where we were, and it’s great to see,” Stollmeyer said.
According to previous reporting from Bloomberg, Mindbody and ClassPass had been discussing a merger since May of this year, and a possible initial public offering once the deal closes.
Mindbody, which provides cloud software to gyms, yoga studios and other fitness businesses, was publicly traded from 2015 to 2019, when it was acquired by Vista Equity Partners for $1.9 billion. ClassPass was valued at around $1 billion in a recent funding round.
Though Stollmeyer did not rule out the possibility of Mindbody going public once again, he said the company is not discussing it at the moment.
“There are multiple other directions the company could go,” he said. “We could remain a privately held company as we are right now indefinitely, so we’re not discussing those things.”
ClassPass will continue to operate its app and website after the acquisition closes, according to a statement from Mindbody. ClassPass CEO Fritz Lanman will serve as president of ClassPass and Mindbody Marketplace, working alongside Mindbody CEO Josh McCarter and other executive team members, Mindbody said.
Mindbody currently employs around 1,500 people around the world, including about 500 in the Central Coast area. It will add around 400 employees from ClassPass.
“ClassPass is a very large consumer marketplace for predominantly fitness, but other different types of wellness as well, and they are kind of a compliment to us,” Stollmeyer said. “We are a B2B-first platform with a consumer app that people are well aware of. ClassPass has built some really innovative business models in the space.”
Both companies were hit hard by the COVID-19 pandemic, Stollmeyer said. Mindbody had to lay off hundreds of employees at the start of the pandemic, but its businesses has started to grow again in recent months.
“The Mindbody team has gone through a rough year and a half,” Stollmeyer said. “We had mass layoffs during my last tenure as CEO, and so now being an executive chairman and at a board level role, it’s been really gratifying to see how the Mindbody team has just come together and performed even more effectively.”
Recent research and data from both companies shows consumers willing to get back to in-person fitness and wellness experiences. According to Mindbody, nearly 80% of consumers feel wellness is more important than ever.
Several markets where gyms and fitness studios have fully reopened are seeing bookings on the Mindbody platform rebounding to pre-COVID levels, and ClassPass consumer usage is at 110% of pre-COVID usage for subscribers who have gone back to classes, according to Mindbody’s news release.
“As the world emerges from COVID, as much as it’s been kind of a bumpy return, what we’ve seen is a built-up consumer demand for wellness experiences,” Stollmeyer said. “One of the things that COVID laid bare for all of us was the real societal cost of unhealthy lifestyles. The people who suffered the most from COVID are those with pre-existing conditions that are hard for all of us in modern life, and what these kind of wellness businesses do, the ones that are found on both ClassPass and Mindbody, is enable people to address those things in a really practical way.”
Stollmeyer said he believes the decade ahead will see even more growth than the previous one, thanks to the emergence of streaming fitness and other wellness classes online, as well as yet-to-be-developed virtual reality experiences.
“COVID definitely threw a curveball, but COVID also accelerated some trends that we think are going to vastly grow and democratize the market,” Stollmeyer said. “The emergence out of this COVID pandemic is hard to predict with precision, but I think we can safely say the world is on the mend right now and while it might be bumpy, we can see that 2022 ahead is going to be a better year for just about everything, and certainly for the wellness industry, so we think the timing is couldn’t be better.”
Mindbody also remains committed to the Central Coast, Stollmeyer said. Though the company will continue to embrace a hybrid work model, it could scale up its local operations in the future.
Mindbody’s $500 million capital raise is its largest since Vista Equity Partners took the company private. The leader of the round, Sixth Street, has invested in companies including Airbnb, which went public in December 2020.
Mindbody said the investment will allow it to accelerate its growth and build upon the product innovations and investments that have been made over the course of the pandemic, which include helping further integrate ClassPass.