Earlier this month Mindbody acquired ClassPass in a rollup of two of the wellness industry’s biggest tech players. In tandem with the acquisition, San Luis Obispo, California-based Mindbody also received a $500 million investment led by Sixth Street Partners.
Yet missing from most of the acquisition coverage is the fact that a connection made in Scottsdale helped bring the deal together.
Mindbody CEO Josh McCarter, who lives in Scottsdale, had been running a Valley company known as Booker, that was acquired by Mindbody in 2018 for $150 million after the two companies existed as neighbors at the SkySong offices in Tempe for years. After the Booker purchase, McCarter worked as chief strategy officer and president at Mindbody before taking the top job in July 2020.
Mindbody’s Scottsdale team has about 100 employees, including leadership like McCarter, the company’s chief revenue officer and its SVP of customer experience.
In total, Mindbody employs 1,400 people, but that number is down significantly from the 2,000 the company had on the payroll before the Covid-19 pandemic.
“Starting in April, [we did] a pretty significant round of restructuring, we let go about a third of the company, which was north of 500 people,” McCarter said. “It's a horrible thing to go through, because of the impact that it's having on people's lives, and on the other side you have to lead your team through that and they're looking to you for direction on what to do.”
Mindbody makes software for gyms and salons to run their businesses, including scheduling, credit card processing, retention activity for customers, marketing, reviews and more. Mindbody’s marquee clients include Orange Theory, F45 and Drybar, as well as other in-person businesses around the world that suffered during the pandemic.
McCarter said they got an early warning of the trouble ahead when they saw payments through the Mindbody platform dropping more than 70% in early 2020. But, the fitness industry got creative by switching to virtual livestream classes and conducting workouts outside when possible, allowing some to weather the storm.
Now, as vaccines continue to be distributed in the United States (about 78% of people ages 12 and up have at least one dose), the fitness industry is hoping to rebound heading into 2022.
The ClassPass deal
McCarter said that Mindbody had been in talks with New York-based ClassPass off and on for years about an acquisition, most recently in early 2020 following ClassPass’s $285 million series E funding that valued the company at more than $1 billion.
In fact, McCarter said his last flight before the pandemic really took hold was to see ClassPass and talk about the acquisition in March 2020.
“When I left on March 13th, it was Friday the 13th and the airport was absolutely empty, there was just nobody there,” he said. “So we put the conversations on pause.”
Those conversations came back earlier this year after both companies saw business picking up. ClassPass is a consumer-facing business that sells a monthly subscription for access to exercise classes at a variety of gyms, whereas Mindbody is almost completely a business-to-business player.
The acquisition, which was an all-stock deal at an undisclosed price, officially closed on Oct. 15. As a result, Mindbody founder Rick Stollmeyer is no longer the chair of the company’s board, though McCarter said he is still part of the heart and soul of the company, as well as a personal friend.
Back on the market?
Mindbody was a publicly traded company when it acquired McCarter’s previous company Booker back in 2018, before it went private in a transaction with Austin- and California-based Vista Equity Partners later that year.
McCarter said the short-term vision for the company is about the integration with ClassPass, but in the next stretch of years it may well return to the public markets.
“We have PE backed ownership and so with that usually comes an expectation that the company is either going to be sold to a strategic or an IPO. I think either of those options are available to us,” he said.
“It's more likely that we end up doing an IPO but timing on that, I just don't have line of sight whether that's in the next year or two years or three years but my hunch is that it's going to be on the shorter end of that spectrum.”
