Partnering with an Independent Sponsor



Massage Envy, LLC

Consumer; Franchising


Partnering with an Independent Sponsor

Company: Massage Envy, LLC

Position: Consumer; Franchising

Location: Scottsdale, Arizona

Date of Investment: December 2009

Exit Date: August 2012

Company Description
Massage Envy was founded in 2002 to capitalize on the significant unfulfilled demand for professional, affordable, and convenient therapeutic massage services. At the time of our investment, Massage Envy was already a leading franchisor of therapeutic massage services with a first-mover advantage through a network of approximately 600 clinics.

In 2008, an independent sponsor unsuccessfully bid on Massage Envy when its founder sold the business. Following the sale, the independent sponsor cultivated a relationship with Massage Envy’s CEO in the hope that the business would soon be sold again. When the new owner decided to sell in late 2009, the independent sponsor was one of only a handful of potential bidders invited to participate. The independent sponsor, who did not have sufficient capital, needed to secure a partner with deep financial resources and an established record in franchising to provide certainty of closing and support a rapid growth strategy.

The Opportunity
To partner with an independent sponsor to acquire a proven franchise concept with excellent unit economics and rapid growth prospects.

Structured Mutually Agreeable Economic Arrangements with Independent Sponsor: Sentinel and the independent sponsor were able to quickly and amicably agree on the financial terms of their respective investments and proceed toward submitting a joint bid.
Utilized Knowledge Gained in Prior Sale Process: The independent sponsor's existing relationship with Massage Envy dating back to its prior sale by its founder was instrumental in positioning Sentinel to act quickly and aggressively. 
Selected as Winning Bidder: The combination of relationships with key stakeholders, our deep franchising experience, and certainty of closing led to Sentinel's selection as the winning bidder. 

During our three-year ownership, Massage Envy grew from approximately 600 to nearly 850 operating clinics with a backlog of more than 270 additional clinics waiting to open. With systemwide sales nearly doubling and average unit volume increasing significantly, revenue and EBITDA more than doubled. During this time, the independent sponsor remained actively involved at the board level. In August 2012, Massage Envy was sold in a management buyout to another private equity firm in a highly successful transaction for both Sentinel and the independent sponsor.