April 2025 fast break. This is PD Mo, captain Halo, magic partner integrity square. You know me from Halo talks, you know me from Halo Academy. However, my day job is doing mergers and acquisitions in the halo sector. What's happening over the next couple of months is going to set the tone for the next five years in this industry. Let me tell you what's about to happen. There are five companies that are going to be sold from one private equity firm to another private equity firm.
And, hopefully, all those transactions actually are completed and are not, quote, unquote, dead deals. The one that's been announced is Crunch Fitness franchise or that is owned by TPG Group. They've owned it for many years, and we've gotten up to about 80,000,000 of EBITDA according to people in the sector. That company will probably try to trade somewhere south of the 20 times EBITDA multiple that
Planet Fitness trades out in the market. We all know that Planet Fitness has a higher margin profitability and a lower build out cost. So we'll see where that trades. But the private equity firm that buys that business is probably gonna try and position it to take it public sometime within the next five years of their ownership. So the question's gonna be, who's gonna buy it? And also, how much debt are
they gonna put on the business? Because the more debt you put on a business, the more risky that business is such as COVID when we had YouFIT, Gold's Gym, New York Sports Club that in shape all filed bankruptcy. If there is another black swan event and you lever up a company, you are now at the whim of the debt providers if that EBITDA shrinks significantly
and if you're in default on any of your covenants. However, if everything works out well, you put debt into a business, instead of writing a check for more equity, your returns are going to be better at the end. So we've also got two south sunbelt chains that are growing very quickly. One of them is over 60 clubs, another one is over a hundred clubs. Those private equity firms are going to
sell to another group that are gonna continue to build out their plan. And the question is gonna be how much debt is put on those companies to actually buy the business because every dollar of debt you use to acquire a business is a dollar less than you can use to actually grow the business and either buy independent operators or to build out construction on growing the business. The only way I make money is a private equity firm. I either buy companies that are low price or the chains and
rebrand them at a lower value than I got into. So I have arbitrage or I build locations and ramp them up from greenfields or I substantially enhance the four wall unit economics of my club. So there's also gonna be be two area developers under a big brand that are substantial in the Northeast and the Southeast. They're also owned by private equity firms.
So within the next sixty days, the private equity community of all different sizes is going to be exposed to health club operations, unit economics, franchise or franchisee relationships, and the groups that get involved and buy these five assets are gonna set the tone for the growth of the industry and also the debt levels of this industry. It's very good right now that Planet Fitness trades at 20 times EBITDA because as a franchisor, you could say, I should be close to that
umbrella financing multiple. And that's what it's worth for Planet. So how close am I to Planet? And Lifetime Fitness is at 17 times EBITDA. Two nice public company multiples that are now used as benchmarks to try and get a private deal done. So see what's gonna come about over the next several months, and the next five buyers are gonna dictate a lot of the
growth in this industry. And hopefully, that growth is profitable growth, and we maybe have five new public companies within the next five years in the halo sector. Go halo.