Vasiceks

Disciple

Raising the bar for Fitness World

Hugo From Jens Stevn Anders Højlund Bue Fisker
MSc Finance MSc Finance MSc Finance MSc Finance

1
 Fitness World is owned by multiple investors, who all needs to be considered in the transaction process

FSN highlights KIRKBI highlights

• Fitness World is FSN Capital is a leading private equity investor in the KIRKBI A/S is the holding and investment company of
currently owned by Northern European region with €2125 million under the Kirk Kristiansen family
different investors
management The investment activities include significant long-term
• The majority is held FSN Capital Funds focus on making control investments investments in companies such as ISS A/S, Nilfisk A/S
by two iconic in companies operating in the Northern European and Falck A/S
companies KIRKBI region
and FSN Capital
Selected credentials Selected Investments

Group structure

Fitness World Holding

A Shares B Shares

50% 8% 42% 79% 12% 9%

FSN Capital IV Minority group Henrik Rossing Private Equity FSN & Other Henrik Rossing

Source: Company websites, case material, annual report 2

1. Introduction

1. Introduction
2. Five year strategy

2.
3. Five year strategy
Indicative valuation

3.
4. Indicative valuation
Buyer & process considerations

4.
5. Buyer & process considerations
Appendix

5. Appendix

3
 Fitness World Group consists of three overall business areas with individualized strengths and separate
complications within the business model

Business areas for Fitness World Current strengths Complication Goal

171 Fitness World is an established

FW centres based market leader in the Danish fitness Being a market leader in Denmark will not
in Denmark market continue generating satisfactory growth 20%
The current concept of Fitness World does Growth rates over the
Fitness World has obtained a strong not allow for any cost-cutting, which is why next 5 years
brand awareness in Denmark Fitness World either need to be scaled to
15 other European markets or increase the
FW centres based Fitness World has proven the ARPM in the Danish market
in Polen concept cross boarder 21
New Urban Gym and
10 Urban Gym has successfully Fitness World centres in
UG centres based implemented a low price concept in
High competition in the low-price segment Denmark by 2023
in Denmark Denmark
with numerous new competitors entering
the Danish market calls for continuous
Urban Gym is completely digitalised concept development
making it very scalable
High churn rate for customers as a
91
consequence of low switching costs New centres in Poland
Simple concept that allows for a low and Germany by 2023
cost structure

Fitness World has developed a solid

product line to increase ARPM
15%
Fitness World faces many competitors in CAGR for Fitness World
the nutrition segment, and therefore needs Functional Supply from
High growth rates in personal training
to differentiate themselves 2018-2023
and Functional supply
The personal training segment is
2 fragmented with many small players
Business units ready Possibility for close consumer contact
for expansion through Fitness Worlds centres

Source: Case Material, Annual Report 2017, Company website 4

 Fitness World has established themselves as a market leader in the Danish market, having twice as many
centres as the second largest competitor, but Fitness World faces large competitors in Europe

Danish competitors European competitors

Company

Wide offering of Offering low-cost Effective and Effective and Cross-fit group Europe’s largest Operates in No frills low cost Mid segment
training activities. convenience quick circle quick circle training with raw member base. Western Europe 24H/365 gym player offering
Targets the broad primarily to 24min training in training in lower image In the 24H/365 low cost targeting mid- to concept. Gyms conecpt such as
Description population. Often millennials living lower population population ‘affordable- concept gyms lower end located in larger TRX and
located in central in urban areas in dense areas in dense areas in premium’- and also runs groups. Gyms cities in the UK organised teams
locations Denmark smaller towns smaller towns segment model agency located in larger
cities

Revenue (DKKm) 1,112 n.a.(a) 423 c. 80 1,833 2,680 1,658 n.a.(a)

EBITDA (DKKm) 230 n.a.(a) -18.3 14.5 655 809 544 n.a.(a)

Geographical focus

Centers
Number of centers 186 86 41 23 246 565 210 368
# Members 476,000 75,000 117.000 20,000 1,700,000 1,520,000 1,100,000 540,000
Intensity 2,959 872 2,854 870 6,911 2,690 5,238 1,467
Staffed centers ()     ()  

Services
Digital comp. (b)

Facilities(c)

31,900 2,100 2,000 9,900 14,100 106,000 118,000 40,100 17,200

3.2 3.0 6.0 7.3 6.0 1.3 1.9 2.8 4.6

Price (DKK/mo) 159-399 100-150 169-199 249-399 389-469 120-200 150-210 75-150 150-210

Notes:(a): Gyms are operated as franchises and no consolidated financial reports available, (b) apps and other digital offering, (c) overall value proposition of gyms
Source: Case Material, Annual Reports, Company website, CapitalIQ, FactSet, MarketLine, Euromonitor, Trustpilot, Instagram 5
 Fitness World is positioned as a market leader in an attractive market driven by shift in population exercise
behaviour

Description 1 Share of adults lifting weights has seen largest growth

1• Survey from National Sports Institute (Idrættens Analyseinstitut) show that while a 2011 2016 Strength training
Strength training 24% 30%
growing share of the population are physically, sports activities are changing. Engagement
30%
X 19%
in traditional sports unions are declining while more individualistic activities such as
Running
CrossFit, Yoga and Strength training are rapidly growing 2007 2011 2016

% of adults engaged
Running
20% 33% 31%
2• This trend manifests itself in the number of commercial Danish fitness gyms growing at a X 28%

CAGR of 7.8% from 380 in 2007 to 803 in 2018

Swimming
2007 2011 2016
Spinning

3• However, the Danish market for gym memberships are still rather fragmented with 23% 10% Yoga Spinning
12%
of all gyms and +35% of members with niche players and boutique gyms.
CrossFit X 11% 11%

2007 2011 2016

Niche Market Mass

2 … which is visible in the development in number of gyms 3 … and Fitness World being the largest player in fragmented market

803
750

663
632
575
535
507
453 450
425 427
380

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Top 5 Rest Total

Source: Case Material, Annual Reports, Company website, Danskernes Motions- og Sportsvaner 2016 6
 Over the last couple of years Fitness World has experienced rapid growth in revenue driven by an increase in
subscription and further introduction of sales of goods and personal training

Current opportunities for increasing the topline with the

P&L development (DKKm)
goal of 20% Y-o-Y
• EBITDA margin has 140 0 30%

decreased over the 26%

25% 25%
last 2 years. This is ✓ Expanding the current business model to new geographical
120 0

25%

22%
however due to 100 0
21% areas
extraordinary 20%

revenue generated in 800

historically. 15%

1242
600

1104 ✓ Focusing on developing the existing concept and expand it

• Normalizations of the 960
1051
860
10%

in the growing Danish market

revenue streams 400

reveal an EBITDA 200

5%

margin of 21.4% in 215 250 263 241 261

2015 versus 21.8% in 0 0%

✓ Partner up with fitness equipment companies that

2016. 2013 2014 2015 2016 2017 complements Fitness Worlds value proposition
Revenue EBITDA EBITDA margin
• The current growth in
revenue is beyond
subscriptions driven Revenue split on drivers (DKKm) ✓ Exploit the newly developed Personal Trainer and
by an increase in
Functional Supply sub-segments by intensifying cross
sales of goods and
selling through membership packages
personal training –
indicating new 104
possibilities for 83
expanding the 86 27 ✓ Develop the Functional Supply segment by increase the
77 16 scale and further the current growth of 25% in revenue
business model 68
coming from sales of goods
1112
965 1005
883
792 ✓ Partner up with a company that generates new value
propositions to current members

2013 2014 2015 2016 2017

Subscription revenue Personal training Sales of goods Other revenue

Source: Case Material, Annual Reports, Team analysis 7

 Even though the cost structure of Fitness World seems flexible, one have to take into account the cost
commitment for operating a fitness center

Cost group Share of revenue Risks Mitigation

Employee expenses 25%
• Includes all costs associated with the operational personnel • Changes in labor • Outsource tasks that
needed. Currently, Fitness World employs 4,500 employees dynamics forcing Fitness easily can be handled by
World to hire full time external companies
• Approximately 75% of employees are part-time, making
employees
employee expenses variable and flexible.

Marketing expenses
• Significant increases in • Develop an ambassador
• Marketing cost for Fitness World going forward is guided at c.
the average acquisition program, at which
4% of revenue but can be volatile do to expansion strategy.
cost of new customers in members will get a
4%
• Brand launches and opening of gyms require marketing new or existing markets reduction if “recruiting” a
expenditure new member
Location and Rent
• Fitness World rely heavily on good locations for gyms to be • Unsuccessful negotiations • Develop long-term leasing
market leading and acquire new customers of rentals going forward agreements and take
leading to NWC increases advantage of bargaining
• Expenses to rent is guided at c. 20% and incorporated in
power towards leasers
financial models ongoing besides initial CAPEX for expansion 20%
Leasing
• Reclassification will make • Constant focus on balance
• In the past Fitness World has leased properties and cars as
Fitness World more asset sheet management and
operational leasing. These will be reclassified as financial
heavy and potentially sale optimization
leasing going forward in accordance with new IFRS 16
of assets less smooth
standard.
9%
Headquarter & Utilities
• HQ in Rødovre handles and incur all costs not directly linked • Industry dynamics forcing • Implement costing
to the operation of the individual gyms FW to spend larger systems that makes it
proportion on overhead possible to allocate utility
• FW is implementing a cost reduction program for utility
expenses which is taken into account in the financial model administration expenses to the individual
9%
centres

Source: Case Material, Annual Reports, Team analysis 8

1. Introduction

1. Introduction
2. Five year strategy

2.
3. Five year strategy
Indicative valuation

3.
4. Indicative valuation
Buyer & process considerations

4.
5. Buyer & process considerations
Appendix

5. Appendix

9
 In order to continue their current growth journey Fitness World needs to establish new domestic initiatives
and expand to cross border European markets

Fitness World need to launch local initiatives to capture domestic growth, but to reach their potential new market penetration is key

1 2
Fitness World need to develop their application to enable… Create loyalty programs for clients to retain current
customers and attract new members

… online contact with centres and personal trainers to

receive advise at all times

Utilizing ‘ambassadors’ Starting mentor

… and enabling the customer to customize their to attract new program for non-fitness
training to their needs… customers by rewarding users to overcome the
3 referrals start barrier

Initiatives will make Fitness World

… also their nutrition needs which will capable of overcoming saturated 3
increase the ARPM Fitness World has over the last years established it’s
Danish market. Increase ARPM
leading position in the Danish market
and increase customer loyalty

Focus on Danish Target frequent Further To continue the growth Fitness World needs to penetrate
market users development new markets

Source: Team analysis, Deloitte report, Case material 10

 Market analysis shows that further engagement in Poland combined with entrance on the German market
will maximize the value of an international expansion

Attractive
Bad Market Membership Average Market share Fragmentati Comparab
Potential Time
revenue penetration price (main players, -on of the -ility to
Fitness World needs revenue frame
(EURb) (% of pop.) (2013-17) 2016) market Denmark
to penetrate
5.1 46 49 36
international markets
with high potential 5.1 48 45 34
where they can
leverage on their 2.5 43 41 30
know-how from the
Danish market 2.2 30 39 7

2.2 46 39 17

1.3 58 37 35

0.8 28 28 10

0.8 45 68 40

0.8 69 32 69

0.5 n/a 36 52

• Poland shows strong potential with a high

fragmented market and large market size
• Germany can potentially generate large revenue
streams, while the comparability to Denmark and
time frame is good

Source: Team analysis, Deloitte report, Case material, Hofstede et. al, Euromonitor 11
 A market analysis of both Germany and Poland reveals a possibility to open 91 new centres combined,
which have the potential of generating DKKm 480 of revenue per year at the end of the forecasting period

By understanding the current competitive landscape Fitness World can target a segment no competitors targets… … which results in

Fitness World is

High
established among the
biggest chains in Poland
50
new centres will be opened in
Poland by 2023

Price
44
37 256
DKKm will be generated from
20
17 17 these clubs at the end of the
14 forecast period

Low
Low Brand reputation High

Fitness World currently have no

High

centres in Germany, but by mapping

the competitors we see a blue ocean
for Fitness World, with their Danish 41
mid-market concept new centres will be opening in
Germany by 2023
Price

321
224
189 DKKm will be generated from
150 these clubs at the end of the
113 105
76 forecast period
Low

Low Brand reputation High

Source: Case Material, Deloitte report (Polen & Germany), Fitness companies homepage, Team Analysis 12
 By combining further penetration on the Danish low cost market and the trend of group training,
Urban Gym will be able to differentiate themselves from other low cost fitness centres

Attractive Intensify penetration on Digitalize and implement group

Expand Urban Gym to rest of Europe Implement “only-group” training
Bad the Danish market training
✓ The fragmentation on the Danish fitness ✓ Fitness World Group will be able to ✓ The “only-group” concept allows for ✓ Digitalizing group training will allow
market combined with the low-price utilize the current Europe-wide trend of Urban Gym to invest in small gyms Urban Gym to utilize the current trend
consumer trend will generate high low-cost memberships designed for group training, that only of group training while staying scalable
Potential revenue streams will be open when group training is in and cost efficient
Urban Gym has not previously proven
profitability session
✓ Experience in the opening of Urban themselves cross-boarder, increasing While being cost efficient the initiative is
Gyms will minimize “experience costs” the risk of long periods of low ROIC ✓ Urban Gym can utilize the large group of targeting a limited customer segment
customers committed to group training

Become leader Targeting Poss. of Become leader Targeting Poss. of Become leader Targeting Poss. of Become leader Targeting Poss. of
in DK within youth targeting in DK within youth targeting in DK within youth targeting in DK within youth targeting
Strategic low-cost segment low-cost low-cost segment low-cost low-cost segment low-cost low-cost segment low-cost
fit with
Urban Gym
✓ ✓ ✓  ✓ ✓ ✓ ✓ ✓  ✓ ✓

Time-to- Current Upfront Time-to- Current Upfront Time-to- Current Upfront Time-to- Current Upfront
market knowhow investment market knowhow investment market knowhow investment market knowhow investment
Ease of
implementation

Source: Case Material, Deloitte report (Polen & Germany), Fitness companies homepage, Team Analysis, Euromonitor 13
 Urban Gym should expand their presence on the Danish market by combined 21 centres in the
urban areas of Denmark by 2023

Top 10 DK cities: # of people between the age of 15-34 The expansion of Urban Gym in Denmark will generate a total of DKKm 77 by 2023

Total 658,389 Others Already est.

3
København 241,319 centers within next New UG
Aalborg 5 years
Aarhus 125,583 2 Pot. rev/5y:12 DKKm
Will have
“only-group”
centers within next
Aalborg 68,294
5 years
Odense 65,309 Randers
Pot. rev/5y:8 DKKm 2
Frederiksberg 33,438 centers within next
5 years
Esbjerg 28,622
Pot. rev/5y:8 DKKm
Vejle 26,852
Aarhus
Randers 23,721 3
centers within next
Kolding 22,626
5 years
Horsens 22,625 Pot. rev/5y:12 DKKm

CPH area
The “only-group” training concept 6
centers within next
5 years
The “only-group” training concept is designed to Esbjerg
capitalize on the current trend of customers preferring
1 Pot. rev/5y:24 DKKm
Horsens
group-training…
centers within next 2
5 years centers within next
Pot. rev/5y: 4 DKKm 5 years
while keeping the low-cost concept by investing in Pot. rev/5y : 8 DKKm
fitness rooms only to be used for group training.

The instructor will arrive 15 minutes prior to the

training, unlock the door, host the session and lock it
afterwards – customers will be able to enjoy group
training at a low cost!

The concept should be piloted in Copenhagen and Odense

2
Aarhus, and expanded to larger cities over time centers within next
5 years
Pot. rev/5y:8 DKKm

Source: Team analysis, Danmarks Statistic, Case material, Municipalities website 14

 Fitness World should grow the functional supply by increasing sales channels, to include e-
commerce, in-center-sales and third party sales

Fitness World should focus on their current customer contact to make The current growth on the market for sports nutrition (DKKm) creates a
personalized customer experiences need for Functional Supply to be scaled rapidly

Current customer trends shows, that knowledge og the brand, its quality and a An expected increase in the market for sports nutrition will primarily be driven
personalized consumer experience are all important factors in the buying by a growth in the usage of protein powder and non-protein sport nutrition
decision. products (i.e. vegetarian and soy products etc.).

Percentage of customers who said considerably or extremely important 200 204 210
190 194 195
Percentage of costumers who said it is one of the five most important 68% 38 40
factors 31 32 34 37
57% 54% 25
23 22 23 24 24
43% 43%
39%
35%
27% 83 86 85 88 91 94

54 54 53 52 50 51

Personalized customer Identification with the Knowledge of the brand Quality of the brand 2016 2017 2018 2019 2020 2021
experience brand and its values Protein Bars Protein Powder Protein Ready-to-Drink Non-protein products

E-commerce – increase brand recognition Shop-in-center – keeping customer contact

High
✓ Fitness World should invest in the sales ✓ The shop-in-center concept should be
of Functional Supply products using e- constructed as a “mini” in-center shop,
commerce – both through own designed to give members a
channels third-party webshops. personalized customer experience

customer contact
✓ Products should be developed to meet ✓ The shop-in-center concept will create
the current trend of increasing demand a possibility to capitalize on the current
for non-protein products personal trainer trend, by utilizing the
current personal trainers, and design
✓ The e-commerce sales channels will programs that entails advisory on
allow Fitness World to scale the which supplements to use and cross-
Functional Supply brand at a relatively selling of the two sub-parts of Fitness
low investment, and at the same time World
Low

increase brand recognition

Low High
Nutritional specialization

Source: Global Consumer Survey, Team analysis, Euromonitor, Case material, Fitness companies website 15
- Penetrate the Polish and - Expand on domestic market - Establish new e-commerce
German market with 21 new centers by 2023 platform an engage third-
party webshops
- Roll out of initiatives - Roll out ”only-group”-
including digitalisation, training initiative in - Roll shop-in-centers and
ambassador model, and Copenhagen and Aarhus engage personal trainers
mentor program
- Will generate DKK 77m per - Will generate DKK 49m per
- Will generate DKK 480m per year by 2023 year by 2023
year by 2023

16
1. Introduction

1. Introduction
2. Five year strategy

2.
3. Five year strategy
Indicative valuation

3.
4. Indicative valuation
Buyer & process considerations

4.
5. Buyer & process considerations
Appendix

5. Appendix

17
 FSN has through successful ownership and management of Fitness World positioned the company
for a profitable exit

Exit climate Method

Internal External Sale IPO

1 1 3
FSN Capital should Approach corporate finance advisor on exit opportunities
assess the current
exit climate and Under the ownership of FSN, FW
articulate a strong has developed market leading
equity story operational excellence

2
… and realized tremendous growth
Comparable firms in number of gyms, members and
listed on the stock financial metrics.
exchange show
strong valuation
momentum
2 4
3 … with listed peer group exhibiting EV/EBITDA expansion
Mapping potential
12x buyers
When exit-decision
is made, advisors
on structure of 10x
sales process can be
of high valued Distribution of
8x
Premarketing

4
In cooperation with 6x
advisors decision Management
between structured presentations
sale and IPO is 4x
made
2x
jan-2014 jan-2015 jan-2016 jan-2017 jan-2018
NBO/DD

Source: FactSet, CapitalIQ, Børsen, Team analysis 18

 By triangulating different valuation techniques Fitness World is indicated to have Enterprise Value in the
range of DKK 2,900-3,300m in a structured sales process
EV/Sales
EV/EBITDA
Trading multiples Multiple Metric (DKKm) EV (DKKm)

2018B

EV/Revenue 2.2x 1,367 3,308

EV/EBITDA 10.1x 277 2,797

Comparable transactions Multiple Metric (DKKm) EV (DKKm)

2018B

EV/Revenue 2.7x 1,367 3,691

Estimated
EV EV/EBITDA 12.8x 277 3,545

Discounted Cash Flow (DCF) EV (DKKm) Implied multiple

(EV/EBITDA)
WACC
7.0% 3,490 12.6x
7.5% 3,240 11.7x

8.0% 2,910 10.5x

Leverage Buy-Out EV (DKKm) Implied multiple

(EV/EBITDA)
IRR
10% 3,872 13.9x
15% 3,274 11.8x

20% 2,814 10.2x

Source: FactSet, CapitalIQ, MergerMarket, Value8, Team Analysis, Case material 19

 xx
An analysis of comparable public traded companies indicates an Enterprise Value of 10.1x EBITDA
Median EV/Sales Highest degree of comparability
Median EV/EBITDA These firms also exhibit cost and market
21.6x leadership targeting the mid-market
segment
Taiwaneese operator
of fitness gyms and
15.5x spas

10.4x 11.0x*
10.1x
10.1x 8.7x
6.5x 6.9x*
6.2x 5.7x
4.9x
3.2x 3.0x
2.2x*
2.2x 1.1x 0.8x 1.0x 0.9x*

1 2 3 4 5 6 7 8 9 10

Company

Country NE SE UK US US MX UK TW SA

Enterprise Value
32,328 14,563 3,802 796 2,443 731 604 2,032 5,508
(mDKK)
Sales
2,666 2,426 766 682 2,499 526 660 475 1,212
(FY in mDKK)
EBITDA-margin
42% 30% 29% 12% 14% 17% 12% 26% 40%
(FY)

EBIT-margin%
34% 7% 13% 4% 3% 7% 4% 14% 27%
(FY)

Expected Growth%
32% 23% 38% 2% 15% 28% n.a. 33% n.a.
(Revenue)

Notes: * Based on LTM

Source: FactSet, CapitalIQ, Company websites 20
 Further analysis of comparable transactions indicates an Enterprise Value of 12.8x EBITDA
Median EV/Sales Non-recent deals
Median EV/EBITDA Older deals included due to strong
17.5x similarities in business model, target
16.9x
segment and profitability.
14.7x
14.2x
12.5x 12.8x
12.8x

8.7x

5.6x
4.6x
3.8x 3.7x 4.1x
3.5x
2.7x 1.9x 1.8x
1.1x
0.8x
1 2 3 4 5 6 7 8 9 10

Target

Country UK UK UK UK UK UK US FR US

Year 2017 2015 2015 2015 2013 2013 2010 2008 2007

Deal Value
4,018 625 28,666 11,495 1,235 781 446 618 4,672
(DKKm)
Sales
1,384 699 7,931 6,116 268 208 409 350 5,967
(DKKm)
EBITDA-margin 17% 12% 29% 13% 26% 26% 9% 20% 19%

EBIT-marigin 2% 2% 18% 2% 11% 9% 7% 11% 10%

Acquired Stake 80% 100% 100% 80% 80% 56% 100% 100% 100%

Buyer

Source: MergeMarket, Company websites 21

 Discounted cash flow analysis taking the proposed 5-year strategy fully into account indicates an
Enterprise Value of DKK 3,237m

Free cashflow forecast Forecasted revenue on strategic initiatives

EV in primo
2018 of DKK Functional Supply e-commerce and shop-in-center
3,237m
Urban Gym openings 49
85
229.9 229.9 Germany expansion
40
69 224
Poland expansion
190.1
Base line revenue 35 174
160.0 54
29 128 256
36 202
122.8 81
113.0 25
144
90.7 12 87
32
22
2.001 2.201
1.653 1.819
1.367 1.503

2018F 2019F 2020F 2021F 2022F 2023F Terminal 2018B 2019F 2020F 2021F 2022F 2023F
value

Sensitivity analysis of EV WACC calculation

Beta estimated on the basis of following peers:

Notes: For further details and breakdown on WACC see appendix

Source: 5-Year strategy, Annual reports, Case material, Deloitte Report, CapitalIQ, Factset, Bloomberg 22
 When applying conservative assumptions to the LBO model, it indicates an Enterprise Value around DKK
3,300m

Required return (IRR) EV/EBITDA exit multiples (DKKm) Sensitivity

4,519 Exit multiple
4,201 6.0x 7.0x 8.0x 9.0x 10.0x
3,872
✓ For investments in established companies in 3,535 1.1x 3,042 3,382 3,716 4,033 4,366
3,205
stable industries with safe and predictable cash
2.1x 3,128 3,459 3,792 4,125 4,443

Debt multiple
flows flow streams investors typically require
10%

an IRR of 10.0%. 3.1x 3,205 3,535 3,872 4,201 4,519

4.1x 3,282 3,611 3,944 4,278 4,611

✓ When using IRR of 10% the LBO model yield EV
in the range DKK 3,205-4,519m 5.1x 3,359 3,687 4,021 4,354 4,687

6.0x 7.0x 8.0x 9.0x 10.0x

3,802 Exit multiple
✓ For investments in established companies with 3,535
3,274 6.0x 7.0x 8.0x 9.0x 10.0x
3,002
stable cash flows investors typically require an 2,737 1.1x 2,505 2,769 3,036 3,290 3,557
IRR of 15%
2.1x 2,621 2,885 3,152 3,419 3,674
15%

Debt multiple
✓ We recommend using this for valuation
3.1x 2,737 3,002 3,274 3,535 3,802
purposes.
4.1x 2,854 3,118 3,385 3,651 3,918
✓ When using an IRR of 15%, we estimate EV for
Fitness World to DKK 3,274 DKKm. 5.1x 2,971 3,234 3,501 3,768 4,034
6.0x 7.0x 8.0x 9.0x 10.0x
✓ For investments with a high risk investors typically 3,238 Exit multiple
3,022 6.0x 7.0x 8.0x 9.0x 10.0x
require an IRR of 20% which can be applicable in 2,814
2,591
2,377 1.1x 2,085 2,297 2,512 2,728 2,934
certain consumer subsectors.
2.1x 2,230 2,444 2,659 2,875 3,081

Debt multiple
20%

✓ Investors will need compensation for bearing high

3.1x 2,377 2,591 2,814 3,022 3,238
risk.
4.1x 2,524 2,738 2,954 3,169 3,385
✓ When using an IRR of 20%, and an exit EBITDA
multiple of 8.0 we estimate EV for Fitness World to 5.1x 2,672 2,885 3,101 3,316 3,532

DKK 2,814 DKKm. 6.0x 7.0x 8.0x 9.0x 10.0x

Cash flow assumptions LBO assumptions

✓ Net Working Capital is relative to revenue ✓ Estimated debt rate of 3%

✓ Tax rate: 22% ✓ Exit multiple is assumed to be 8.0x EV/EBITDA

✓ EBITDA-margin is constant at 20.3% ✓ Exit EBITDA (FY2022/23): DKK 570m

Source: FactSet, CapitalIQ, Value8, Team Analysis, Case material 23

1. Introduction

1. Introduction
2. Five year strategy

2.
3. Five year strategy
Indicative valuation

3.
4. Indicative valuation
Buyer & process considerations

4.
5. Buyer & process considerations
Appendix

5. Appendix

24
 Based on a structured research the following companies have been identified as top tier potential buyers

Strategic buyers Financial

Financial strength
High A
Low Weak competitors Interest Tier I
✓ High estimated synergies
A B between business
models
 Financial strength to
undergo M&A activity
High

B
Strong financial buyers Interest Tier II
✓ High estimated synergies
Strategic Fit

and similar cost

leadership
C
✓ Strong market position
✓ Financial strength to
acquire Fitness World

C
Low

Strong but distant

Interest
Financial Sponsor Scorecard
✓ Major gym chains with
high financial strength ✓ Strong domestic platform
to undergo M&A
 Distant in geography
and business culture
✓ Proven concept in Poland

✓ Fitness World can be levered

Source: FactSet, CapitalIQ, Value8, Team Analysis, Case material 25

 Well prepared process with early warm-up of strategic players

Jan 19 Feb 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19 Jan 20

Kick-off meeting

Data gathering
Preparation
Part 1:

Preparation of Financial databook, buyer universe analysis

materials
Preparation of Marketing
Marketing
Preparation of Information Memorandum
IM

Send out
Marketing and IM

Marketing and NDA’s

marketing
IM and process
Part 2:

letters
Interest indication
from buyers
Buyer selection for
next phase

MP preparation Preparation
and data gathering
Management
Part 3:

presentations
MP

Indicative
offers
Selection of buyers
for next round

Dataroom access
for buyer
Closing
Part 4:

Final offer and

negotiation of SPA
Signing and closing
of deal

Source: Team Analysis 26

 Identification of risks and mitigation strategy will ensure no complications throughout the sales process

High Critical risk factors in relation to the sale of Fitness World Legal and strategic considerations when mitigating risk

Legal considerations in regard to risk

Ensure all legal agreements in writing and properly executed.

Letter of intent as well Confidentiality is key for your protection

of key elements within Fitness World and keeping the sale under
the radar.
Probability

5
Within the SPA the major point of interest is Payment method.
3 We want to push for a pure cash deal which ensures payment
1 right away and not a financing deal

Furthermore we want to minimize the amount locked in the

escrow to minimize alternative cost.
4 2
Low

Strategic considerations in regard to risk

Low High
Impact
Creation of pre-marketing, Information Memorandum and at last
Critical risks Mitigating factor Management Presentations should be comprehensive enough to
Preparation of legal documents, protection during the process take into account changes in market conditions.
1 Legal Problems
and the SPA is key elements
Ensuring that the implementations process is structured and Constant communication between advisors on commercial and
2 Strategy falling trough financial parts of the process will ensure that enough information
specific enough
will be available to make thorough projections for Fitness World.
A comprehensive buyer analysis, ensures the right fit both
3 Deal falling trough
strategic and financial.
Thorough analysis of the buyer universe will ensure a competitive
Monitoring markets that FW is engaged in can mitigate. Crucial price .
4 Changes in market conditions
factors are health trend, the economic and political environment
Monitor and ensure that 3 party agreements are not violated, a Optimization of the balance sheet, P&L and Cashflow will ensure
5 Changes in leasing agreements
proper monitoring should minimize the risk exposure smoothness in the financial due-diligence phase.

Source: Team Analysis, Accura ‘Overdragelsesaftaler’ 27

 Strengthen domestically by expanding Urban Further penetrate the polish market and enter
Fitness World has a strong market position
Gym and introducing e-com and group fitness the German market
Strategy going forward

>

Based onoutlook
... supporting a positive the current
with exit climate,
multiple we recommend
growth anfor
opportunities exit
KPstrategy
Group trough a private sale
Exit strategy for FSN

Exit climate suggest a The valuation indicate Initial buyer research A structured process
private sale an EV in the rage of suggest multiple financial mitigates major risk in
2,900-3,300 DKKm and strategic buyers. the process

28
1. Introduction

1. Introduction
2. Five year strategy

2.
3. Five year strategy
Indicative valuation

3.
4. Indicative valuation
Buyer & process considerations

4.
5. Buyer & process considerations
Appendix

5. Appendix

29
Appendix overview
Description # Description #

Strategic buyer profiles 35

Financials for valuation 31

Strategic buyer profiles 36

WACC calculations and assumptions 32 Strategic buyer profiles 37

Strategic buyer profiles 38

Budget period breakdown 33 Strategic buyer profiles 39

Financial buyer profiles 40

Equity bridge 34
Financial buyer profiles 41

30
 Financials for valuation
Assumptions made about financials and growth strategy

Notes: Provisions are excluded from FCF since it covers Audit provisions, and is therefore normalized out, The financial expenses are assumed
constant since the growth strategy will be financed by the free cashflow and reserves 31
 WACC calculation and assumptions

Target capital structure A A

In order to estimate the D/EV we use their current interest bearing
Current debt 827,664
EBITDA 254,769 debt level. And in estimating the EV we use the weighted EBITDA
EBITDA Multiple 8.5 multiple from the listed peers and transactions
D/EV 38.2%
Company Beta [2Y] B
Fitness planet, Inc. 1.14
B
The Gym Group, Plc. 0.53
The Beta applied is calculated as a average of the peer groups.
Town Sports International, Inc. 1.40
Basic-Fit, N.V. 0.90 Notice not the entire peer group is used since Beta estimates was
YogaWorks, Inc. 0.50 not available for all.
Actic Group 0.50
Average 0.83
Estimation af cost of debt C
Risk Free Rate 1.6% C
We have estimated Fitness worlds cost of debt as a weighted
Credit facility 1) 225 3.5%
Credit facility 1) 550 4.0% average of their current debt facilities
Weighted Cost of Debt 3.9%
CAPM D
Beta Asset (unlevered) 0.83
Beta Equity (assuming constant D/EV) 1.34 D
Market Risk Premium 5.3% Market risk premium is based on PWC’s yearly Cost-of-capital report
Risk Free Rate 1.6%
(February 2016). A size premium is added when the transaction EV is
Size premium 1.4%
Cost of Equity 10.1% between 2-5DKKbn.
Weighted average cost of capital E
Cost of Equity 10.1%
Cost of Debt 3.9%
E
Tax 22.0% The risk free rate is calculated based on the rate of the Danish
Capital Structure (D/EV) 38.2%
WACC 7.4% government bond with expiration in 2023

Source: Duff and Phelps (2016), PWC report, Reuters 32

 Assumption for development in Revenue and EBITDA
Revenue and EBITDA development

CAGR: 8.7% CAGR: 15%

2.815 2.815
2.486
2.180
• An expected 3 % baseline growth
1.886
Revenue

• Implementation of initiatives
1.592
primo FY 2019 1.367
• Contingent on Initiatives meeting 1.050 1.104
1.242
their ‘base case’

2015* 2016 2017 2018F 2019F 2020F 2021F 2022F 2023F Terminal

CAGR: 8.7% CAGR: 15%

570 570
503
441
• Employee expenses, operating 382
EBITDA

income and losses is assumed to 322

have a constant percentage 255
277
relative to revenue 218 227

2015* 2016 2017 2018F 2019F 2020F 2021F 2022F 2023F Terminal

33
 Equity bridge

Estimation of synergies Strategic buyer synergies

Change in NWC after 1. Revenue synergies

Synergies are highly valuation date, can have
depend on the buyers, positive or negative 1.1 Cross selling of fitness worlds supplements
and therefore estimated effect on the finale
later in the process equity value
1.2 Increased knowhow-sharing leading to increased sale

?? 2. Cost synergies
7.0
2.1 Administration sharing

772 2.2 Optimized processes

3. Financial synergies
40.0
3.1 Tax advantages
2,600 32.0
29.0
??
4. Dissynergies

4.1 Cultural impacts

4.2 Resignation of key staff

Stand Alone Synergies Buyers share Final EV Δ NWC NIBD Equity value 4.3 Transaction costs (Consultants, advisers, lawyers etc.)
Value

34
 Description Acquisition rationale
• Basic-Fit is one of Europe's leading fitness chains
✓ Basic Fit is looking to expand their activities in the European Strategic
• It currently has 565 fitness stores. across, The Netherlands, Belgium,
area
Owner Luxemburg, France and Spain
✓ Fitness World would be a target which would let Basic-fit
Listed Company • Basic Fit have 1.67 million members and 3,500 employees
enter the Danish market with ease Financial
• Basic-fit operates primarily in the value for money segment
✓ Furthermore, the two companies has a good strategic fit, since
• The company is currently expanding rapidly, and opening around 100
both focus on the value for money segment
stores pr. Year, where the majority of the new stores are located in
M&A
France

Stock price Geography Top 3 shareholders

4%
400
350
300 16%
28%
250
200
150
100
50 Mito Holdings S.À R.L.
0 AM Holding B.V.
2013 2014 2015 2016 2017 Pelham Capital Ltd

M&A activity Financials

Year: Target: Country: Segment:
2013 Miktom Topco B.V (nka:Basic-Fit N.V.) NL Fitness Stores
2010 Miktom Topco B.V (nka:Basic-Fit N.V.) NL Fitness Stores mDKK 2013 2014 2015 2016 2017 Valuation
Sales n.a. 1,207 1,509 1,922 2,426 Market cap: 11944 mDKK
Sales growth% n.a. n.a. 25% 27% 26% EV/Sales(NTM): 4.77x
EBITDA n.a. 308 404 512 717 EV/EBITDA(NTM): 15.15x
EBITDA margin% n.a. 26% 27% 27% 30% EV/EBIT(NTM): 47.42x
Net income -614 -168 -171 -241 83 P/E(NTM): 46.39x

35
 Description Acquisition rationale
✓ Fitness World enables a high growth journey which is a Strategic
• Pure Gym Limited was founded in 2008 and is based in Leeds in the
requirement for the majority owner
Owner United Kingdom
✓ The strategic fit is high due to the similarities within the two
Private • The company mainly focus on the value for money segment and low
business model Financial
cost segment, where they in the later segment is the leader in the UK
✓ The similarities between Denmark and the UK is high, which
• Their product include training in their gyms, and classes as well as
implies a low risk of not realizing the synergies. A low Cash
personal training.
balance M&A

The majority owner Investment criterias Geographical focus for Leonard Green & Partners
Leonard Green & Partners is a US-based Private equity firm which At least 50% growth over a 5-6 year
invests in companies in the range of 500 DKKm and 3,500 DKKm., in period
companies EV between 1000 DKKm and 10,000 DKKm. The
company has shown a specific interest for the fitness industry
where they now own Pure gym and earlier they owned Equinox.
Operates within consumer, business
and/or healthcare services

Prefer a majority stake and positive

cashflow companies.

M&A activity Financials

Year: Target: Country: Segment:
2018 Ovalhouse Limited GB Operator of gyms mDKK 2013 2014 2015 2016 2017 Balance sheet
2017 Pure Gym Limited GB Leonard green acquires 80% Sales 401 574 833 1,298 1,657 Current assets 139
2015 LA Fitness Limited GB Operator of gyms Sales growth% n.a. 43% 45% 56% 28% Non current assets 2099.00
2014 The Gym Group GB Operator of gyms EBITDA 116 161 183 339 543 Current liabilities 707.00
EBITDA margin% 29% 28% 22% 26% 33% Non current liabilities 785.00
2013 Pure Gym Limited GB CCMP acquires 80%
Net income 18 64 29 162 163 Long term debt 28.31x

36
 Description Acquisition rationale
• The Gym Group was founded in 2007 in the united kingdom ✓ The company is currently looking for targets not only in the Strategic
• The Gym Group operates 130 gyms located in the UK UK but also abroad
Owner • They plan to roll out 40 new gyms in the UK and they are looking at ✓ The Urban Gym brand would fit well into their portfolio of low
Listed Company target outside the UK Financial
cost gyms, and the Fitness World Brand would allow them to
• Their main segment is the Low cost segment where The Gym Group is get into the value for money segment
the second largest operator after Pure Gym, eventhough they have the
most rapid growth. M&A

Stock price Geography Divisions

400

350
39% 35%
300

250

200

150
26%
100

50
Franchise
Corporate-Owned Stores
0 Equipment
2013 2014 2015 2016 2017

M&A activity Financials

Year: Target: Country: Segment:
2018 13 Gyms of Fore Fitness Limited GB Gyms
mDKK 2013 2014 2015 2016 2017 Valuation
2017 Competition Line (UK) Ltd, 18 Gyms GB Gyms Sales 276 436 608 639 766 Market cap: 3623 mDKK
2014 The Gym Group Holdings Limited (nka:The Gym Group GB
plc) Pure gym aquires the firm Sales growth% n.a. 58% 39% 5% 20% EV/Sales(NTM): 3.27x
2013 The Gym Limited (nka:The Gym Group plc) GB Phoenix aquieres 56% EBITDA 72 104 105 190 224 EV/EBITDA(NTM): 10.14x
EBITDA margin% 26% 24% 17% 30% 29% EV/EBIT(NTM): 20.68x
Net income -71 -84 -116 50 60 P/E(NTM): 28.31x

37
 Description Acquisition rationale
✓ Fitness World would be an optimal platform for Planet Fitness Strategic
• Planet Fitness franchises and operates fitness centers under the Planet to enter the European market
Owner Fitness brand ✓ Planet fitness has the financial strength to acquire.
Listed Company • It operates through three segments: Franchise, Corporate-Owned ✓ Further more there is significant synergies to be realized Financial
Stores, and Equipment. trough leveraging the sales channels of Planet fitness to push
• As of December 31, 2017, the company had 1,518 fitness centers, Fitness world product, and reduce overhead cost by running a
which include 1,456 franchised and 62 are corporate-owned combined operation M&A

Stock price Geography Fitness clubs

400

350

1,518
300

250

200

150 Fitness centres based in primarily

100
United states
50

0
2013 2014 2015 2016 2017

M&A activity Financials

Year: Target: Country: Segment:
2018 6 Franchise Stores in Long Island US 6 Franchise Stores acquired mDKK 2013 2014 2015 2016 2017 Valuation
Market cap: 30574 mDKK
2014 Eight Stores in the Hudson Valley area of NY US 8 Franchisee-Owned Stores Sales 1,143 1,721 2,271 2,664 2,666
EV/Sales(NTM): 9.26x
Sales growth% n.a. 51% 32% 17% 0%
2012 Planet Fitness, Inc. US TSG Partners acquires stake EV/EBITDA(NTM): 22.90x
EBITDA 353 589 720 1,030 1,114
EV/EBIT(NTM): 26.04x
EBITDA margin% 31% 34% 32% 39% 42%
P/E(NTM): 44.59x
Net income 138 226 127 151 206

38
 Description Acquisition rationale
• Leejam Sports Company owns and operates a network of sports and Leejam has the financial strength to undertake an acquisition of Strategic
fitness centers in the Middle East and North Africa Fitness World, which would allow them to cross boarder, and give
Owner • The company operates across six primary formats, which include them enhanced grow possibilities which would raise their
Listed Company Fitness Time Plus, Fitness Time, Fitness Time Pro, Fitness Time Junior, rumored IPO. The main problem in regards to this deal is the Financial
Fitness Time Ladies and Fitness Time Ladies Pro. Cultural and geographical distance, which would lover the
• As of December 31, 2017, it operated 112 fitness centers synergies and make Leejam more skeptical for an investment.
• The company also has the Fitness Time Academy brand that is primarily
M&A
associated with football related activities.

Stock price Geography Top three shareholders

400
3% 3%
350

300

250

200

150
60%
100
Al-Saqri, Hamad Ali
50
Al-Haqbani, Abdulmohsen Ali
0 Target Opportunities Company For Trading
2013 2014 2015 2016 2017

M&A activity Financials

Year: Target: Country: Segment:
2013 Leejam Sports Company SA Investcorp aquire Leejam Valuation
mDKK 0 2014 2015 2016 2017
Sales 0 738 1,089 1,315 1,212 Market cap: 4766 mDKK
Sales growth% n.a. #DIV/0! 48% 21% -8% EV/Sales(NTM): 4.40x
EBITDA 0 324 486 568 482 EV/EBITDA(NTM): 11.26x
EBITDA margin% n.a. 44% 45% 43% 40% EV/EBIT(NTM): 17.50x
Net income 0 226 331 379 288 P/E(NTM): 17.04x

39
 Appendix I Financial buyers Tier 1

Description Description
TSG Consumer Partners is a US-based Private equity firm which
Leonard Green & Partners is a US-based Private equity firm which
invests in companies in the range of 600 DKKm and 3,500 DKKm, in
invests in companies in the range of EV between 1,000 DKKm and
companies with between 100 DKKm and 10,000DKKm in revenue and
10,000 DKKm. The company has shown a specific interest for the
EBITDA up to 1,800DKKm. The company has shown a specific interest
fitness industry where they now own Pure gym and earlier they
for the fitness industry where they dedicate a part of their portfolio to
owned Equinox.
outdoor and fitness companies, and include Gyms and supplements.

Geography Investment criteria Geography Investment criteria

At least 50% growth over a 5-6 year They only invest in firms with
period significant growth potential
Operates within consumer, business Among others, TSG Partners targets
and/or healthcare services the fitness industry specifically

Prefer a majority stake and positive Their investment horizon is 5 years

Market presence cashflow companies. Market presence or longer

Current or former owned companies Current or former owned companies

Rationale Rationale

TSG Partners have experience within both operating Gyms and fitness supplement producers.
With their current position in Pure Gym, Fitness world would be an ad on acquisition. The
Both of which are within the business model of fitness world. TSG would be able to leverage
acquisition, would allow Pure Gym and LGP to enter the Danish market without having to
their knowledge within the fitness industry to further expand fitness worlds operations, and
compete against the incumbent. Further more, Pure Gym and Fitness worlds business models a
their knowledge within supplements, to drive further sales of Fitness Worlds own supplement
highly similar, which would allow LGP to realize Cost synergies.
line.

40
 Appendix I Financial buyers Tier 2

Description Description Description Description Description

UK based private equity firm, US based private equity firm, New Evolution Ventures was UK based and provider of US based private equity firm,
which invests up to 150EURm in and seek to invest between founded in 2008 and is based in venture capital and private founded in 2005. The company
equity. IK Partners prefer to 100USDm and 500USDm in Lafayette, California. New equity. Phoenix seek to invest Prefer to invest within :
invest within care, consumer equity. CCMP Capital focuses on Evolution Ventures is a private within 6 sectors, where one of consumer goods and retail, and
goods, and industrial goods. IK three industries: Consumer, equity firm which seek to these are the Consumer & is currently highly exposed to
Partners acquired 74% of Actic Industrial and Healthcare. In manage, and operate health, Leisure sector. Phoenix acquired the fitness industry. The
in 2012 from FSN 2009 CCMP acquired Puregym fitness, wellness, media, and 56% of the The Gym in 2013 majority of LNK Partners
sports entities. investments are minorities.
Criteria Criteria Criteria Criteria Criteria
EV <500EURm EV between Within the Fitness or sport EV <2,000DDKm Equity<200USDm
250 USDm and 2USDbn sector
Geographical focus Geographical focus Geographical focus Geographical focus Geographical focus

Portfolio companies Portfolio companies Portfolio companies Portfolio companies Portfolio companies

41
42