Equity funding could drive some of the much-predicted consolidation in the boutique sector
THE FIGHTBACK BEGINS Change is coming, with consolidation likely in the market – especially in the boutique sector. Nadim Meer advises operators how to position themselves for investment
July 2020 ©Cybertrek 2020
the aftermath of a crisis, many private equity investors will be keen to return to the market and deploy capital as soon as possible. In terms of timing, however, we are unlikely to see much private equity investment before Q4 of this year. Valuations are too uncertain and few investors would be prepared to hand over their cash without having met the management in the flesh. Although we’re hearing about some deals which have been completed over Zoom, for the majority of investors, this isn’t a substitute for meeting face to face when it comes to the private equity investment world. This will be challenging news for businesses that are experiencing a cash squeeze, as rent and other payments become payable and the furlough scheme is wound down, however, it does allow those that are better capitalised the luxury of time to plan and position the business for investment.
Get ready for investment
Now is the time to prepare – take a long, hard and dispassionate look at all aspects of your operation. Innovate, improve digital
s lockdown restrictions begin to lift, fitness businesses are focusing on navigating the new (socially distanced) landscape and getting a better idea of the impact the pandemic is having on their business model and longer-term financing requirements. Some will not survive and some will not reopen. However, this will allow other operators space to grow and develop in a market that’s less crowded compared to the pre- COVID landscape. In terms of sources of finance, operators will need to look for suitable sources of funding that fit their business model – one realistic target for raising capital will be the private equity and private capital community. While some investment activity is on hold at present, history suggests that following a crisis there is a flight of capital towards private companies. If you add to this the fact that preCOVID there were many private equity funds sitting on significant amounts of uninvested capital and that – historically – their best returns have been made when investing in