The Endurance Economy (Part 2) - M&A Activity
An overview of the current and future M&A Environment in the Endurance Race Industry
Introduction
In Part 1 of this deep dive into the Endurance Race Industry, I explored a high-level view of the ecosystem as it currently stands and hinted at some of my thoughts on the event types, disciplines, and categories that present the most investment promise.
In Part 2, I’m going to explore the current mergers and acquisitions environment in endurance sports, specifically within the races themselves. By evaluating the investments made by private equity firms and corporate acquirers, we can further gain insight into where the smart money is finding potential within the space. The Endurance Race industry is ripe for consolidation and deal-making activity, and the underlying factors pushing this trend are an important consideration for entrepreneurs and race operators as they evaluate long-term exit scenarios.
M&A Environment
Taking a step back to view M&A activity across the entire economy, the current state is somewhat grim. According to a report by PwC, total M&A deal volume was down 25% in H1 2024 compared to 2023. This is a continued slide in overall activity since peaking in 2021.
When broken down by type of acquirer, financial sponsor deal volume was down 34% compared to strategic acquirers, which was down 18%. This disparity is primarily driven by financial sponsors’ stronger reliance on debt to finance deals, which is more difficult to secure in higher interest rate environments.
The total deal value actually increased by 5% in the same period, but this may be due to some outlier megadeals in the energy and technology sector (Capital One’s proposed $35.3B acquisition of Discover Financial, Synopsys’ proposed $32.5B acquisition of Ansys, and Diamondback’s proposed $25.8B acquisition of Endeavor Energy Resources). Below is a chart from PwC that shows M&A volume and total value since 2019.
Although it’s impossible to pinpoint one clear reason for the decline in activity, a few possible explanations include:
Higher valuations in public and private markets have made it more difficult for buyers and sellers to find common ground.
Geopolitical tension in Ukraine and the Middle East has created uncertainty in financial markets.
Dealmakers may be sitting on the sidelines waiting for the result of the 2024 Presidential Election.
Macroeconomic factors, namely inflation and increasing interest rates, have made it more difficult to finance deals.
Although the current environment is less than stellar, I’m optimistic for the back half of 2024. Financial sponsors continue to sit on record amounts of dry powder that must be deployed, either due to contractual obligations or pressure from limited partners. Record capital raises over the last decade ($13.3T in Private AUM in 2023) have left private equity firms flush with cash that they must deploy into attractive opportunities.
Additionally, with the slowdown of IPO activity in the last decade-plus and many private fund vintages reaching the end of their expected life, PE managers are facing increasing pressure to exit assets, likely through the M&A route.
Strategic acquirers are also sitting on large cash balances. The current macroeconomic environment has made it increasingly difficult to meet organic growth objectives, and many firms will turn to acquisitions of capabilities, talent, and technology as an alternative means of hitting growth targets.
Many industry practitioners agree with this optimism. In a survey of 1,500 corporate and private equity executives conducted by Deloitte Consulting, 83% expect an increase in deal volume in the back half of 2024. In a similar survey by EY, consensus estimates predict a 20% increase in corporate M&A deal volume and a 16% increase in PE deal volume.
Factors Driving M&A in Endurance Races
Shifting focus back to the Endurance Race industry specifically, despite the slowdown of M&A activity in general, acquirers are still relatively active in endurance sports.
Dealmaking can take various forms, including the acquisition of new technologies for race management, participant tracking, and digital engagement. It can also include the acquisition of related apparel and equipment brands. Finally, it can include the races themselves, which will be the focus of this post.
The strategic rationale behind acquiring an endurance race will be vastly different depending on the acquirer, but a few of the more common reasons may include:
Diversification: Single-race entities face significant exposure to race day disruptions. Weather events, course modifications, or the loss of key race personnel can jeopardize not only the race itself but also the entire business. Multi-race platforms reduce this risk and exposure. A singular race can still be disrupted or even canceled, but this won’t result in a shutdown of the entire operation. Diversification of race type, key personnel, and geographic location greatly reduces the overall business risk profile, and acquisition is a common way to achieve these objectives.
Economies of Scale: As with any industry, endurance race platforms achieve efficiencies when operated at scale. Given the marginal difficulty in organically scaling an endurance race behind a certain size threshold, horizontal expansion through acquisition could be one feasible way to achieve this scale. There is still a high degree of variable costs with each individual race, but fixed costs such as human capital, corporate overhead, and timing/registration/marketing technology can be utilized across multiple races. These shared fixed expenses create better unit economics at the individual race level and the platform more efficient overall.
Inorganic Growth: As mentioned in Part 1 of this series, races with less than 500 participants represent ~95% of the total races in the US. These smaller races have had the strongest comparative growth since pre-pandemic levels (13.6% growth since 2019, compared to 5-7% contraction for races with 500-5,000 and 15.9% contraction for races with more than 5,000) and were the quickest to recover from the COVID-19 shutdowns. This dominance of smaller races is in part because the race business model relies on an in-person experience and is not like a technology company that can be easily scaled. Safety personnel, supplies for aid stations, merchandise, and, in part, insurance are all variable costs that scale with incremental participation. It simply becomes more logistically burdensome to operate larger races. These facts, on top of a tough economic environment, make it extremely difficult for operators to scale organically. Rolling up multiple races into one platform is a more viable approach to hit growth objectives.
Ecosystem Building: A final strategic reason for acquiring endurance races is the opportunity to create an ecosystem that appeals to a variety of customer profiles, provides more touch points, and collectively creates strong brand recognition. On average, races retain 13.6% of participants year-over-year. This is because many races are seen as a one-time goal and experience. Rather than fighting this trend and losing customers completely, operators that have multi-race portfolios can offer participants a new experience and a new goal, all while keeping them within the ecosystem. The IRONMAN Group and Life Time, Inc. are two examples of companies that have done this extremely well. Each race underneath their respective umbrellas provides a unique experience for the consumer, but ultimately, participation in all of the races feeds into one bottom line.
Anecdotally, after completing the Life Time Silver Rush 50 Mountain bike race in 2019, I started my search for my next race by revisiting the Life Time events website, which led me to the Austin Rattler. Once completing the Rattler in November of this year, I will most likely tap into their ecosystem again as I build out my race calendar for next year. Each race presents a unique experience and goal that can fulfill my needs, but I also know the consistency and quality of experience I will have.
An additional consideration of this approach is creative ways operators can keep individuals in the ecosystem. Discount programs allow finishers to quickly sign up for another race at an attractive price. Life Time also uses its suite of races as qualifiers for the highly coveted and restricted-access Leadville 100. Various races around the country are qualification feeders to Leadville, driving participation at what used to be regional races.
The Endurance Race industry is fragmented, and many of the smallest events are operated by local retail shops or community leaders. Their business model makes it difficult to operate on a stand-alone basis. All of these factors make it an attractive industry from an M&A perspective, and I think we are seeing this play out from the levels of acquisition activity.
Recent TXNs
When evaluating the predominant buyers in this space, there seem to be six key categories:
Pure Play - Event Production Companies (The IRONMAN Group, Spartan Race, Super League Triathlon)
Diversified Fitness Companies (Life Time, Inc., iFIT, ASICS)
Sports Media Companies (Wanda Sports Group, CLASH Endurance, LimeLight Sports)
Media/Newspaper Companies (Gannett Co. Inc, Denver Post Company, Wick Communications)
Private Equity/Family Offices (Advance, Orkila Capital, Providence Equity Partners)
Each buying group has different objectives with their acquisitions of endurance races, ranging from pure economic incentives to community development to including a race as a key component of a marketing and branding strategy.
Below are a few examples of notable transactions over the last decade, sorted from oldest to most recent:
Life Time, Inc. | Leadville Race Series (August 2010)
In 2010, diversified fitness company Life Time, Inc. acquired the premier mountain bike race in the country, the Leadville Trail 100, which was founded in 1983. The race has been a key centerpiece in Life Time’s live events ecosystem, with multiple smaller regional races serving as qualifiers for Leadville. The race has expanded to include a 50-mile race along with a trail running series. Financial details of the transaction were not disclosed.
Wanda Sports Group | The IRONMAN Group (August 2015)
In 2015, Beijing, China-based Dalian Wanda Group Co., through its subsidiary Wanda Sports Group, acquired 100% of the IRONMAN Group from Providence Equity Partners for $650M. Providence Equity Partners held the IRONMAN Group in its portfolio for 7 years prior to the exit.
The IRONMAN Group | Lagardere Sports Endurance Division (January 2016)
In early 2016, The IRONMAN Group acquired UK-based Lagardere Sports’ Endurance Division, which included 5 triathlon events, 4 marathons, 6 cycling events, and other mass participation events spanning 3 continents and 8 countries. No financial terms on this transaction were disclosed.
Gannett Co, Inc. | Rugged Races (March 2018)
In March 2018, media powerhouse Gannett acquired Boston-based Obstacle Course Racing (OCR) circuit Rugged Races for an estimated $10.4M. In 2021, the company merged with RAM Racing and joined over 115 other endurance-related events in Gannett’s Ventures Endurance portfolio.
Life Time, Inc. | Crusher in the Tushar (December 2019)
In 2019, Life Time, Inc. acquired Utah-based Crusher in the Tushar, a half-pavement, half-gravel cycling event in the Tushar Mountains. Financial details of the transaction were not disclosed.
Spartan Race | Tough Mudder (February 2020)
In early 2020, obstacle course racing operator Spartan Race acquired the business and assets of competitor Tough Mudder out of Chapter 11 bankruptcy. Reports claim Spartan paid roughly $700k for the assets of the business and assumed all liabilities. With the acquisition, Spartan Races further cemented itself as the dominant player in OCR, with over 250 events in 40 countries and more than 1.2M participants.
Life Time, Inc | Unbound (March 2020)
In March 2020, Life Time, Inc. bought the Dirty Kanza gravel race (name later changed to Unbound) from owners Jim Cummins, Lelan Dains, Tim Mohn, and Kristi Mohn. Based in Emporia, Kansas, Unbound has become one of the premier gravel events in the country and has been instrumental in growing the sport of gravel riding. No financial details of the transaction were disclosed.
Advance/Orkila Capital | The IRONMAN Group (July 2020)
In mid-2020, private investment firm Advance, along with Orkila Capital, bought The IRONMAN Group from Wanda Sports Group in an all-cash transaction valued at $730M. The IRONMAN Group is the parent organization of the Ironman Triathlon races, the Ironman 70.3 race series, the Rock n Roll Marathon Series, and the Epic Series of Mountain Bike races.
LimeLight Sports | Virgin Sport (September 2020)
Sports marketing firm LimeLight Sports acquired mass participation events business Virgin Sport in late 2020. The Virgin Sport portfolio consisted of key events such as the Asics London 10k, Oxford Half Marathon, and Hackney Half Marathon. No financial details of the transaction were announced.
The IRONMAN Group | Mozart 100 (October 2020)
In late 2020, the IRONMAN Group acquired the Mozart 100, a trail-running event based in Salzburg, Austria. The Mozart 100 was previously independently owned. No financial details of the transaction were disclosed.
Super League Triathlon | Malibu Triathlon (November 2020)
In late 2020, the UK-based triathlon league Super League Triathlon (SLT) acquired the Malibu Triathlon from Michael Epstein. This was SLT’s first move into the US market. The Malibu is an iconic triathlon that’s been around since 1986 and whose picturesque setting often attracts high-profile celebrity participants. No financial details of the transaction were disclosed.
Race Day Events | Endurance Evolution (February 2021)
Wisconsin-based Race Day Events acquired the race portfolio and timing operations of Michigan-based Endurance Evolution, owned by Joel Gaff, in early 2021. The events in the sale included the Traverse City Triathlon, Sleeping Bear Marathon, Half Marathon, and 5k, among other trail and virtual events. These races join the 25+ other events in the Race Day Events portfolio.
Roll Massif | Enchanted Circle Bicycle Tour (April 2021)
A subsidiary of Outside Inc., Roll Massif, acquired the Enchanted Circle Bicycle Tour in Northern New Mexico from the Red River Chamber of Commerce and the Town of Red River. The Enchanted Circle Bicycle Tour has 350+ participants and offers an 85-mile and 100-mile route through picturesque towns in New Mexico, including Red River, Taos, Questa, Angel Fire, and Eagle Nest. No financial details of the transaction were disclosed.
iFit | 29029 (July 2021)
Connected fitness software conglomerate iFIT acquired endurance hiking event company 29029 from founding partners Marc Hodulich, Jesse Itzler, and Colin O’Brady in July of 2021. 29029 is a category leader in a unique, niche event format of endurance hiking. Participants repeatedly hike a mountain, taking a chairlift down until they have hiked a total of 29,029 feet, the equivalent of the elevation of Mt. Everest.
Life Time, Inc. | Sea Otter Classic (August 2021)
In late 2021 Life Time, Inc. expanded its live events portfolio by acquiring the Sea Otter Classic, a cycling event and consumer expo held annually in Monterey, California. Sea Otter was previously owned by Frank Yohannan, who operated the race for 30+ years. Financial details of the transaction were not disclosed. The 4-day Sea Otter Classic is North America’s largest consumer cycling event and hosts more than 9,000 riders and 74,000 fans.
The IRONMAN Group | Haute Route (August 2021)
In 2021, The IRONMAN Group acquired Haute Route, a series of multi-day cycling events, along with the Gravel Epic Series. In total, the acquisition added 8 new events to IRONMAN’s portfolio. In 2024, two France-based events previously acquired in this deal were divested from the IRONMAN portfolio and sold to France Velo Evenements. Financial terms of the transaction were not disclosed.
Gannett Co, Inc. | Ride the Rockies (November 2021)
In 2021, Gannett Co. acquired the marquee cycling event, Ride the Rockies, from The Denver Post Company Foundation. Ride the Rockies was established in 1986 and consists of over 2,000 cyclists covering 418 miles over 6 days. Financial terms of the transaction were not disclosed.
The IRONMAN Group | 4islands (November 2021)
In late 2021, The IRONMAN Group acquired the 4islands MTB Stage Race from Advance. 4islands is a mountain bike race held annually in Croatia. This race was added to the “Epic Series” within IRONMAN’s portfolio, which consists of iconic mountain bike stage races held throughout the world.
Tris4Health | Events from Epic Races (December 2021)
In 2021, endurance race company Tris4Health acquired two races from Epic Races, the Ugly Dog Triathlon and the Waterloo G&G Gravel Road Race. These races join other Tris4Health portfolio races, such as the Grand Rapids Triathlon, Michigan Titanium, and The Dirty Mitten Gravel Triathlon. No financial details of the transaction were disclosed.
San Diego Running Co. | San Diego Resolution (February 2022)
San Diego Running Co. acquired the San Diego Resolution 5K, 10K, and Half Marathon, which collectively have 2,000+ participants. These races join the San Diego Running Co. portfolio, which oversees multiple events and about 15,000 participants. Other events in the portfolio include the San Diego Leprechaun Run, America’s Finest Corporate Dash, Pacific Beach Half Marathon 5k, and the San Diego Santa Run.
Salty Sports Society | Swim with Nick (June 2022)
Open water swim race operator Salty Sports Society acquired the management contract for the 501C3 Race Swim With Nick Memorial Race. The race is held annually in Dania Beach, Florida, and was formed in memory of Nick Dworet, who was killed in the school shooting at Marjory Stoneman Douglas High School in Parkland, Florida. This race joins 3 other races as part of the Speedo SALT Series, including Camp Alligator (Clearwater Beach, Florida), Swim for Alligator Lighthouse (Islamorada, Florida), and Southern Cross (Fort Myers Beach, Florida). No financial details of the transaction were disclosed.
CLASH Endurance | Daytona Beach Half Marathon (September 2022)
Sports Media company CLASH Endurance added the Daytona Beach Half Marathon to its portfolio of 4 other endurance race events in late 2022. CLASH has carved out a niche by focusing on endurance races hosted at iconic speedways throughout the country. No financial details of the transaction were disclosed.
Infront | Hyrox (October 2022)
In late 2022, Infront, part of the Wanda Sports Group, acquired a majority stake in fitness racing powerhouse Hyrox. Hyrox joins other mass participation events in the Infront portfolio, including the Abbott World Marathon Majors, the Berlin Marathon, the Rome Marathon, the Cape Town Marathon, and Muddy Angel. No financial details of the transaction were provided.
Heidi Muller | Adventure Racing World Series (January 2023)
CEO of the Adventure Racing World Series, Heidi Muller, led a group of investors in a management buyout from Australian-based Geocentric Outdoors. She was joined by Philip Signsworth, Michael Bond, and Jason Wilford in the acquisition. Adventure racing is a blend of multi-sport triathlon with navigational elements, with races generally lasting 3-10 days. Financial details were not disclosed.
Super League Triathlon | New York and Chicago Triathlon (February 2023)
In early 2023, Super League Triathlon (SLT) acquired the New York Triathlon and the Chicago Triathlon from Life Time, Inc. Financial transaction details were not disclosed. The acquisition of these two marathons, in addition to the existing holding of the Malibu Triathlon, gives SLT three of the longest-standing and largest triathlon events in the country.
Wick Communications | Bisbee 1000 (July 2023)
In mid-2023, family-owned media company Wick Communications acquired the Bisbee 1000 Great Stair Climb from Bisbee Vogue Inc. As a long-time supporter and sponsor of the event, the acquisition made sense from a diversification standpoint in addition to maintaining strong ties to the local community. The event is a 4.5-mile race throughout the town of Bisbee, Arizona, and includes 1,000 stairs. It has been around since 1990. Financial details of the transaction were not disclosed.
Yii Sports & Media | LimeLight Sports (November 2023)
Late last year, Yii Sports & Media acquired LimeLight Sports, which includes notable races such as the Asics London 10k, Hackney Moves, Oxford Half Marathon, and Blenheim Palace Triathlon. These events join existing sports properties in Yii’s portfolio, including Ospreys Rugby Club, Motiv Running (Long Beach Marathon and New Jersey State Triathlon), and Challenge Family (more than 30 long and middle distance events). Financial details of the transaction were not disclosed.
Super League Triathlon | Long Beach Legacy Triathlon (December 2023)
After acquiring events in Chicago and New York earlier in the year, SLT added to its US-based portfolio with its partnership and investment in the Long Beach Legacy Triathlon. SLT will partner up with USA Triathlon, which has historically operated the event. It’s a significant event because it’s the proposed course for the LA Olympics 2028.
My Predictions
In Part 5 of this series, I’ll dive more specifically into the areas in which I see the most investment potential. Regarding M&A activity, though, I believe both macroeconomic and industry-specific factors will lead to significant deal-making activity in the Endurance Race industry over the next 5 years. As stated by PwC Partner Brian Levy below, I believe there is so much built-up dry powder in the capital markets and so much fragmentation in the endurance events space that deal-making activity will only accelerate.
“The daunting combination of high interest rates, current valuations and political uncertainty has been a showstopper for many deals. Nevertheless, the strategic need for M&A continues to grow stronger, creating pent-up demand which will be unleashed as these uncertainties resolve.” - Brian Levy, Global Deals Industris PWC
What does this mean for industry participants? Financial and strategic acquirers will continue to look for ways to build their portfolios to improve the economics of the racing ecosystem, particularly in race formats and disciplines that will be in demand from the next generation of race participants.
For operators and entrepreneurs evaluating an exit to a financial sponsor or strategic (which, as an aside, does not need to be a goal), it’s important to consider the factors that will set the race up to be an enticing target. First, focus on formats and race disciplines that will be in demand for the next generation of participants. As can be induced from many of the divestitures and spinoffs of larger format road racing and triathlons, what has been popular historically will not necessarily continue to be.
Second, race operators can get a leg up by getting ahead of digital transformation. Integrating technologies to make race registration and race management more efficient is a key component of the acquisition thesis, and those races that have already streamlined operations will be that much more attractive to buyers.
And finally, invest in building a differentiated brand and unique race experience. Acquirers are not only considering the pure financial performance of a specific race, but rather, does that race have a brand that would be a unique asset within a larger endurance racing portfolio? This is usually demonstrated by a proven recurring revenue base and the presence of out-of-market participants who are traveling to a race to compete. Does your race have a strong enough brand to make it a destination event?
Thanks, as always, for reading. In the next post in this series, I’ll discuss the early-stage investment opportunities and the technologies that are reshaping how endurance races are operated.