The Sports Barn was founded in 1978 by some of Chattanooga’s most prominent businessmen. Over the years, the Sports Barn grew from its initial location in downtown to a total of three facilities strategically placed around the Chattanooga area. The Sports Barn served approximately 5,520 memberships, representing nearly 11,000 individual members. The Sports Barn was managed by non-owners but overseen by a very involved board of directors. The competitive landscape over the past several years had grown intense as the Sports Barn competed against a very strong local YMCA and a regional fitness center that was aggressively recruiting younger members, making it difficult for the Sports Barn to grow its member base.
Sports Barn Acquisition Company is a Chattanooga-based company that was formed for the purpose of acquiring and operating the assets of Sports Barn, Inc.
As the age of the founders increased, the need to sell the Sports Barn became more apparent as the owners were seeking liquidity for their investment. Family ownership transfers would have greatly increase the number of shareholders and continually decreased the ability to control the operations. The board believed that more involved ownership could more effectively compete in the ever competitive market place.
A detailed review of the universe of potential buyers revealed a good number of possible regional and national players. However, the general poor financial position of most of these players necessitated looking for potential local buyers.
A valuation of the Sports Barn facilitated informed discussions of a price for which the shareholders would be willing to sell. Upon agreeing to a target price, we began the job of finalizing the search for regional and national buyers as well as investigating the possibility of selling to local buyers. A detailed Confidential Information Memorandum was prepared and the Sports Barn was actively marketed with limited interruption of management.
We were able to create a competitive environment in a difficult market by successfully engaging several interested parties. With this competitive environment in place, we were able to establish a firm negotiating position and execute a Letter of Intent with a group of local buyers. We then efficiently closed the transaction with minimal changes to the original LOI. Sports Barn, Inc. shareholders received a price for which they were very well satisfied, while the buying group will continue to provide the community with high quality, locally owned fitness facilities.