Over the last five tosix years, several well-reputed equity firms invested in the fitness industry(Table 1).Typically, these private equity companies raised $200 to$600 million from pension funds, retirement funds, and Wall Street or major banking firms, and then invested 10 to20 percent of the fund in the club company.

Often, the equity is leveraged with debt. Until the last 12 to18 months, equity could attract total debt of four times a company’s EBITDA (earnings before interest, taxes, depreciation and amortization).

However, debt markets tightened during the last year, so the ratio of debt to EBITDA was reduced at one point to 2.5 to2.75. Now, it is growing again, up to between three tofour times EBITDA.

However, most of the lending organizations have focused on much larger deals, leaving the healthclub industry with few interestedlenders.

The private equity firms had, therefore, been sitting on the sidelines for some of these 18 months. This means that there has been money raised, but not deployed. Although many firms continue to look at the healthclub industry, few new players have committed. It is hoped thatby 2011, this situation will loosen up.