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Thread: Anthos/CrossFit Debacle

  1. #76
    Cardio bunny Alex.V's Avatar
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    Quote Originally Posted by JustinM View Post
    Before I get the "you're ignorant" comment -- I think that I have been doing CF for longer than anyone here besides Anthony,
    Psst- I did crossfit for about a year back in 2002 with a buddy of mine who was a former SEAL. So I win.

    /pointless comment.
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  2. #77
    Administrator chris mason's Avatar
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    Quote Originally Posted by mrelwooddowd View Post
    I love Crossfit and have done it religiously for over 2 years, but i know very little about the business side or internal workings so I'll happily stay out of that discussion, but...

    Is there something I'm missing?

    The way I see it, if Anthos changes things too much, what's to stop gym owners from just dropping affiliation, changing the gym name (if it says Crossfit in it), and continuing on with the same philosophy? As it stands, even the "Crossfit Games" competition is open to anyone, regardless of affiliation. And from what I recall you don't even have to have full affiliation to lead Crossfit workouts at your gym as long as a Level 1 is running the sessions.

    It's not like McDonalds, where without the franchise you have nothing. There's no secret sauce in bumper plates and kettle bells.

    I will partially disagree with you. The CrossFit name is a huge draw for membership. I guarantee you that if you opened two gyms with the same trainer and one was CrossFit the CrossFit one would grow significantly faster. CrossFit affiliates have a 2% failure rate. That is absolutely incredible and it is not simply due to the trainers.


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  3. #78
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    Yeah I mean, let me try and stick with the McDonald's analogy. I'm east coast, not sure if everyone is familiar with, I don't know, how about Five Guys Burgers and Fries? Five Guys as far as a burger goes kills a McDonald's burger. But that McDonald's brand is huge!

    CrossFit could drop the title, affiliates de-affiliate and start up, TrueFit or whatever. That rebranding effort however would be a huge effort and a major drop off at first. Convince affiliates to take the risk, negotiations with Reebok and ESPN have to take place. A gridlock is just as bad. Imagine you own a company, which is now hugely successful and someone's simple disagreement keeps you from any further changes or innovations when your instinct and vision has obviously served the brand well up to this point. I mean, who actually starts by giving away the product for free?

    Sounds like a nightmare scenario to me.

  4. #79
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    Chris, I have a pretty good finance background, and I am a transactional attorney. I also worked for the world's top consulting firm. I have a pretty good understanding of private equity and M&A..

    Anyway, the issue is not whether they want to do anything. It is that they can't. A 50% owner can force gridlock, but that is about it. They cannot implement changes. If Anthos wants to do something and Greg does not want to allow it, then it cannot be implemented. This also works the other way around, but Greg is the current CEO and gridlock would be disastrous for Anthos.

    And yeah, of course the divorce court would need to approve anything. But eventually, Lauren will sell her shares, and I really doubt the judge will let Greg decide who she can/cannot sell to.
    Last edited by JustinM; 08-19-2012 at 10:13 AM.

  5. #80
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    Alex - you run a 4:40ish mile with something close to those lifts? Holy shit. You must get tons of girls. Are you super tan, too?
    Last edited by JustinM; 08-19-2012 at 10:13 AM.

  6. #81
    Administrator chris mason's Avatar
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    Quote Originally Posted by JustinM View Post
    Chris, I have a pretty good finance background, and I am a transactional attorney. I also worked for the world's top consulting firm. I have a pretty good understanding of private equity and M&A..

    Anyway, the issue is not whether they want to do anything. It is that they can't. A 50% owner can force gridlock, but that is about it. They cannot implement changes. If Anthos wants to do something and Greg does not want to allow it, then it cannot be implemented. This also works the other way around, but Greg is the current CEO and gridlock would be disastrous for Anthos.

    And yeah, of course the divorce court would need to approve anything. But eventually, Lauren will sell her shares, and I really doubt the judge will let Greg decide who she can/cannot sell to.
    While I do not possess your experience, I would bet a lot of money you are incorrect in what they can do (my guess is you are correct in a direct sense, but perhaps not in an indirect one). My guess is there are ways they can manipulate things once they get a 50% share.

    With that said, I am no expert on that front, so I won't argue that point further.


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  7. #82
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    Sorry Chris, I am not trying to call you out. I just thought Justin was correct with his post. I am roomies with an attorney who talks about the matter and says the same. I know you said you wont argue the point and neither will I. Just wondering why you would bet money on it? Just because the all mighty dollar controls all? Like you said, I am not an expert and do not want to start an argument. I am just hearing a lot of conflicting sides on the matter and like others here would like to know why.

  8. #83
    mrelwooddowd Patz's Avatar
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    Quote Originally Posted by chris mason View Post
    I will partially disagree with you. The CrossFit name is a huge draw for membership. I guarantee you that if you opened two gyms with the same trainer and one was CrossFit the CrossFit one would grow significantly faster. CrossFit affiliates have a 2% failure rate. That is absolutely incredible and it is not simply due to the trainers.
    I agree 100% that it's a great business model and I'm a big fan of it for the most part, but from what I know of it it's largely dependent on individuals who own gyms and do their certs and lecture work on the side. Those individuals bailing and restructuring would pull the rug right out from under HQ. Maybe I'm wrong though?

    I wonder how much leverage Reebok has in this?
    Last edited by Patz; 08-20-2012 at 10:34 AM.
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  9. #84
    Administrator chris mason's Avatar
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    Quote Originally Posted by Sirtificate View Post
    Sorry Chris, I am not trying to call you out. I just thought Justin was correct with his post. I am roomies with an attorney who talks about the matter and says the same. I know you said you wont argue the point and neither will I. Just wondering why you would bet money on it? Just because the all mighty dollar controls all? Like you said, I am not an expert and do not want to start an argument. I am just hearing a lot of conflicting sides on the matter and like others here would like to know why.
    I would bet on it for two reasons:

    1) Anthos would NOT buy a 50% share unless they thought they could change the business model. To believe anything else is naive in my opinion.

    2) There always seem to be ways. Perhaps they could find a legal way to oust coach Glassman etc.?


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  10. #85
    Administrator chris mason's Avatar
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    Quote Originally Posted by mrelwooddowd View Post
    I agree 100% that it's a great business model and I'm a big fan of it for the most part, but from what I know of it it's largely dependent on individuals who own gyms and do their certs and lecture work on the side. Those individuals bailing and restructuring would pull the rug right out from under HQ. Maybe I'm wrong though?

    I wonder how much leverage Reebok has in this?
    Reebok has essentially none.


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  11. #86
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    Quote Originally Posted by chris mason View Post
    I would bet on it for two reasons:

    1) Anthos would NOT buy a 50% share unless they thought they could change the business model. To believe anything else is naive in my opinion.

    2) There always seem to be ways. Perhaps they could find a legal way to oust coach Glassman etc.?
    Thanks Chris! I was wondering if Anthos would try to change the business model. I am naive on this subject though. The only reason why I was asking. And your right, there are always ways.

  12. #87
    mrelwooddowd Patz's Avatar
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    Quote Originally Posted by chris mason View Post
    Reebok has essentially none.
    As far as the divorce, no, but I think they must have some leverage behind the scenes. They're too important to Crossfit's growth at this juncture. I would imagine there are some contractual obligations there that can't be broken either. Regardless, I hope this all turns out well.
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  14. #89
    Cardio bunny Alex.V's Avatar
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    Quote Originally Posted by JustinM View Post
    Alex - you run a 4:40ish mile with something close to those lifts? Holy shit. You must get tons of girls. Are you super tan, too?
    I'm taken, buddy. You shameless flirt, you.
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    Quote Originally Posted by chris mason View Post
    Private equity firms seek a 5X return on investment. The want to realize it in a relatively short period of time.
    I'm not sure where this 5x return meme got started (it seems to pop up in any discussion of this deal), but it is simply untrue. Think about what you are saying -- Anthos expects to make 100 million on this, and if they only make 70 or 80 then it was a bad investment.

    In any event, I'm not sure why bringing in some people with business savvy will be so bad for crossfit. Look at how much more exposure the sport has since the Reebok deal.

  16. #91
    Cardio bunny Alex.V's Avatar
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    Quote Originally Posted by minnieapple View Post
    I'm not sure where this 5x return meme got started (it seems to pop up in any discussion of this deal), but it is simply untrue. Think about what you are saying -- Anthos expects to make 100 million on this, and if they only make 70 or 80 then it was a bad investment.
    This is not a meme- private equity firms typically have very high anticipated ROI for the companies they purchase/fund to make up for the vast number of failures- 500% ROI in 2-4 years is not uncommon.
    "Except Belial. He knows everything. This isn't a sarcastic attack, either. He really knows everything." -----Organichu
    "Alex is all knowing and perfect"-----Jane (loosely paraphrased)
    -515/745/700 bench/deadlift/squat
    Current mile time: 4:23
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  17. #92
    Tap, Rack, Bacon ncsuLuke's Avatar
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    Quote Originally Posted by Yamar View Post
    I like this version...

    Video

  18. #93
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    Quote Originally Posted by Alex.V View Post
    This is not a meme- private equity firms typically have very high anticipated ROI for the companies they purchase/fund to make up for the vast number of failures- 500% ROI in 2-4 years is not uncommon.
    And they usually are highly leveraged..

  19. #94
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    Quote Originally Posted by chris mason View Post
    1) Anthos would NOT buy a 50% share unless they thought they could change the business model. To believe anything else is naive in my opinion.
    Are people as concerned about the millions that Greg is seeking from private equity firms? Or is that somehow different?

    http://anthosandcrossfit.blogspot.kr...te-equity.html

  20. #95
    Administrator chris mason's Avatar
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    I'm not concerned at all. He needs a lot of cash to buyout his ex. Investors are where you go for that. If Greg makes the arrangements he controls the terms of said agreement. He is not a stupid man. He will protect his interests when he does so.


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  21. #96
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    Quote Originally Posted by chris mason View Post
    I'm not concerned at all. He needs a lot of cash to buyout his ex.
    And it will take a lot of cash flow to service the debt he is planning to take on. Assume he gets the $17 million at 6%, that would be $100,000/month just to stay on top of the interest. A little while back, HQ was trying to secure a loan to buy a $700,000 plane. Now they are going to take on interest payments that are almost as much as buying two planes a year?

    Quote Originally Posted by chris mason View Post
    If Greg makes the arrangements he controls the terms of said agreement.
    Why would Greg be in control? He is the borrower.

  22. #97
    Administrator chris mason's Avatar
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    Minnie,

    1) You don't know anything about the plane deal. The deal did not go through for reasons having nothing to do with credit/profitability.

    2) He would be in control because as the borrower you always have the power of choice. You can accept terms offered you or not. CrossFit is quite profitable, I am quite sure there are many lenders that would be happy to work with them.
    Last edited by chris mason; 10-02-2012 at 10:52 PM.


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  23. #98
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    Quote Originally Posted by chris mason View Post
    Minnie,

    1) You don't know anything about the plane deal. The deal did not go through for reasons having nothing to do with credit/profitability.
    Enlighten me.

    Anyway, the point about the plane was more the fact that HQ needed a loan to purchase a $700k plane. And now they are going to take on a $17 million loan that will require $1.2 million a year (almost two planes) just in interest payments?


    Quote Originally Posted by chris mason View Post
    2) He would be in control because as the borrower you always have the power of choice. You can accept terms offered you or not. CrossFit is quite profitable, I am quite sure there are many lenders that would be happy to work with them.
    I had the choice to walk away my mortgage lender, does that mean I was in control of the terms of my mortgage? Of course not, it's silly to suggest otherwise. All I got to do was shop around for the best rate and points package. All the actual terms of the agreement were essentially the same and set entirely by the bank.

  24. #99
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    People need to actually take a look at these so-called banks Greg is seeking money from.

    THL Credit (http://www.thlcredit.com/junior-cred...junior-debt/):

    Quote Originally Posted by THL Credit
    THL Credit’s junior debt group invests primarily in junior capital securities of sponsored and unsponsored companies that require capital for growth, acquisitions, recapitalizations or changes of control. Such securities include subordinated, or mezzanine, debt and second lien secured debt, which may include an associated equity component such as warrants, preferred stock and other similar securities. We also selectively invest in first lien senior secured loans that generally have structures with higher interest rates, which include unitranche investments. In certain instances, we also make direct equity investments.
    They are making an investment by taking a security interest in Crossfit.

    And take a look at this.

    Quote Originally Posted by THL Credit
    Our investment approach for junior debt consists of four separate and distinct phases: (1) sourcing; (2) selecting; (3) structuring; and (4) supervising investments....

    Sponsored investments are sourced via long-standing relationships and ongoing development of new relationships with private equity sponsors and their advisors who view us as a value-added partner in the transaction, rather than simply a source of capital to leverage returns.
    They are NOT passive investors.

    Level Equity, the other "bank" (http://www.levelequity.com/results.php)

    Quote Originally Posted by Level Equity
    Level Equity’s principals bring 35 years of experience investing more than $500 million across 39 growth companies. These growth businesses have completed 6 public offerings and 24 have been acquired since 1998. The firm is currently investing from Level Equity Growth Partners I, LP, a $130 million vehicle.

    They have invested in 39 companies, 6 have gone public and 24 have been acquired. Do these sound like the actions of a "bank" that gives out "mortgages"? Or does it look like a typical, profit-motivated, investment firm?

  25. #100
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    Minnie, it sounds like you do not have a great grasp on corporate finance. CrossFit (Greg) will probably secure a mix of equity and various forms of debt. CrossFit will make sure that it does not sell enough equity to allow 50% of the company to be owned by a third party. Therefore, Greg will retain control of CrossFit. The excess funding will come from various forms of debt. The excess (the debt) will be significantly less than the $17 million that Glassman is apparently seeking. He will probably grant a security interest in CrossFit so that rates stay low. It will also help to have mezzanine and similar classes of debt in order to keep the rates down. There may also be some kind of baloon payment that Greg sets up.

    I think it is hard to determine CrossFit's cash flow...

    (Another alternative would be to just sell non-voting equity, like preferred stock ... Glassman could have the minority of the outstanding equity, but still have full control)
    Last edited by JustinM; 10-07-2012 at 09:30 PM.

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