Partnering with Independent Sponsors
Massage Envy was founded in 2002 to capitalize on the significant unfulfilled demand for professional, affordable, and convenient therapeutic massage services. At the time of our investment, Massage Envy was already a leading franchisor of therapeutic massage services with a first-mover advantage through a network of about 600 clinics.
Background
In 2008, an independent sponsor unsuccessfully bid on Massage Envy when its founder sold the business. Following the sale, the independent sponsor cultivated a relationship with Massage Envy’s CEO in the hope that the business would soon be sold again. When the new owner decided to sell in late 2009, the independent sponsor was one of a handful of potential bidders invited to participate. The independent sponsor, who did not have sufficient capital, needed to secure a partner with deep financial resources and a proven record in franchising to provide certainty of closing and support a rapid growth strategy.
Opportunity
To partner with an independent sponsor to acquire a proven franchise concept with excellent unit economics and rapid growth prospects
Accomplishments
Structured a Mutually Agreeable Economic Arrangement: Sentinel and the independent sponsor agreed quickly and amicably on the financial terms of their respective investments and proceeded toward a joint bid.
Leveraged Knowledge from Prior Sale Process: The independent sponsor’s relationship with Massage Envy dating back to its prior sale by its founder was instrumental in positioning Sentinel to act quickly and aggressively.
Selected as Winning Bidder: The combination of relationships with key stakeholders, our deep franchising experience, and certainty of closing led to Sentinel’s selection as the winning bidder.
Outcome
Sentinel acquired Massage Envy in December 2009. During our three-year ownership, Massage Envy grew from approximately 600 to nearly 850 clinics, with a backlog of more than 270 clinics waiting to open. Systemwide sales nearly doubled, and the average unit volume increased 42.5%. This drove strong financial performance at Massage Envy, with revenue and EBITDA more than doubling. During this time, the independent sponsor remained actively involved at the board level. In 2012, Massage Envy was sold in a management buyout to another private equity firm in a highly successful transaction for both Sentinel and the independent sponsor.
Case studies have been selected for illustrative purposes for management teams of midmarket companies considering a partnership with Sentinel and should not be considered an offer or solicitation of services or an actual or implied endorsement of Sentinel or any security, investment, or portfolio company. The portfolio companies highlighted are not representative of all current and prior investments of Sentinel. A list and description of investments since Sentinel’s inception is available on this website.