Information on the Target

Aura Private Equity has successfully executed a partial secondary sale of Limited Partnership interests valued at A$9 million in the Aura Franchise Opportunity Fund 2 Pte. Ltd. This fund was specifically established to invest in Inspire Brands Asia Pte. Ltd. (IBA), the parent company of the Anytime Fitness and SUMHIIT Fitness brands across multiple markets, including the Philippines, Malaysia, Singapore, Hong Kong, Indonesia, Thailand, Taiwan, and Vietnam. Importantly, this transaction does not alter Aura Private Equity's direct stake in IBA.

IBA was formed in 2020 with the intention of acquiring the Master Franchisee license for the globally renowned gym franchise, Anytime Fitness, in the Asian landscape. Currently, IBA operates the largest fitness gym network in Southeast Asia, Hong Kong, and Taiwan, boasting 487 clubs and over 400,000 members. Additionally, in 2023, IBA has broadened its offerings to include the swiftly growing fitness brand, SUMHIIT Fitness, which focuses on high-intensity interval training and complements its existing services.

Industry Overview in the Target’s Specific Country

The health and fitness industry in Southeast Asia is witnessing exponential growth, spurred by an increasing awareness of health and wellness among consumers. Market penetration remains relatively low with average gym penetration rates around 1%. This is considerably lower than in more developed Asian markets where penetration can reach 6-8%. Such discrepancies represent a significant opportunity for growth in the fitness sector.

Despite the challenges posed by the pandemic, the industry has shown resilience. Consumers are increasingly willing to invest in their health, leading to a surge in the demand for fitness services and facilities. This trend is reinforced by a growing number of urban professionals who prioritize fitness as part of their lifestyle.

Franchised businesses, notably in the fitness sector, are emerging as attractive investment opportunities given their established business models and operational systems. The trust in franchises stems from their uniformity in services and recognizable branding, which helps drive customer loyalty.

As more international fitness brands enter the Asian market, local franchises are poised to capture a larger share of the consumer base, affirming the ample prospects for revenue growth and market expansion in this region.

The Rationale Behind the Deal

This secondary sale undertaken by Aura Private Equity is a clear indicator of the burgeoning investor interest in the health and fitness market, particularly in Asia. The transaction not only signals a positive outlook on the growth potential of the fitness industry but also reflects confidence in the sustainability of franchised businesses as they rebound and expand in this market.

Furthermore, the financial metrics resulting from this deal—such as a Distributed to Paid-in Capital ratio reaching 1.24x and a blended Gross multiple on invested capital of 2.30x—demonstrate a robust economic performance which reinforces the strategic rationale behind the investment in IBA.

Information About the Investor

Aura Private Equity operates as the private equity arm of Aura Group, a prominent pan-Asian investment firm managing assets exceeding A$1.5 billion. The firm is dedicated to identifying and capitalizing on middle-market private equity opportunities throughout Southeast Asia and Australia, with a strong emphasis on investing in market-leading enterprises.

Aura Private Equity’s portfolio includes several high-profile investments, such as Catapult Group International and Kim Dental. Its strategy is geared towards capturing sustainable growth through investment in businesses with solid performance records, showing their expert approach in evaluating investment opportunities in evolving markets.

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In the current landscape, the investment by Aura Private Equity into Inspire Brands Asia presents a compelling proposition for investors seeking to capitalize on the fitness industry's growth trajectory in Southeast Asia. With low market penetration and increasing health consciousness among consumers, the region is ripe for expansion, making IBA a strategic choice for growth-oriented investment.

The company's robust operational performance, evidenced by significant growth in club numbers and membership, supports the notion that it will likely continue to thrive in this segmented market. Moreover, the alignment of IBA's strategies with consumer preferences enhances its position as a pivotal player in the fitness industry.

However, potential investors should remain cognizant of the competitive landscape in the fitness sector, as new entrants and existing competitors may influence market dynamics. Despite this, IBA's established network and recognized brand reputation position it advantageously to withstand competitive pressures.

Overall, Aura Private Equity's deal signifies not just the potential for financial returns, but also reflects a broader trend of investor optimism surrounding fitness ventures in Asia. As lifestyle choices evolve, incremental investment in the sector could yield significant long-term benefits, warranting positive evaluations of such strategic investments.

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