- Leading wellness experience platform Mindbody announced it has entered into a definitive agreement to acquire wellness subscription service ClassPass
- In conjunction with the deal, Mindbody secured a strategic investment of $500 million from an investment firm that has previously backed Airbnb, Spotify and NBA team San Antonio Spurs
- ClassPass Founder Payal Kadakia to part with the company she started in 2013, with CEO Fritz Lanman to become President of ClassPass and Mindbody Marketplace alongside Mindbody CEO Josh McCarter
- “We’re taking the number one player in B2B and number one player in B2C and bringing them together to help the industry get back on its feet after months of closures and restrictions,” McCarter told Welltodo
SAN LUIS OBISPO, United States — Mindbody and ClassPass, leading providers of technology to fitness, beauty, spa and salon businesses around the globe, today announced they will be joining forces to “lead the industry out of Covid”.
In one of the most seismic deals to hit the wellness industry since the coronavirus pandemic struck, the acquisition will bring two of the sector’s most prominent leaders together, creating a one-stop-shop for both business owners and consumers.
Rumours of a merger had first circulated in May this year and, according to Mindbody CEO Josh McCarter, the deal has been years in the making. However, it is only today that California-based Mindbody could confirm it has entered into a definitive agreement to acquire New York City-headquartered ClassPass.
The acquisition – an all-stock deal at a non-disclosed price – will integrate both teams, with ClassPass continuing to operate its app and website. Upon closing of the deal, ClassPass CEO Fritz Lanman will serve as President of ClassPass and Mindbody Marketplace, working alongside McCarter and Mindbody’s executive team.
“Powering a new era of wellness”
“This is a ‘better together’ story,” McCarter told Welltodo ahead of the announcement. “It’s really about how we can accelerate our mutual mission, which is about connecting the world to wellness and democratising access to wellness and making it available to more people.
“We’re bringing together the number one player in B2B and number one player in B2C and really helping the industry get back on its feet after months of closures and restrictions. Together we’ll be leading the industry out of Covid and really powering this new era of wellness.”
For Lanman, who became ClassPass CEO in 2017, the deal comes at a time when both companies’ data suggests the industry is recovering strongly from the pandemic.
“It has been a really tough past 18 months, especially for studios, gyms and proprietors who run these small businesses,” Lanman told Welltodo on the same call with McCarter. “However, the good news is we see that once somebody goes back to one in-person experience in a wellness or fitness place they go back to 110% of their pre-pandemic usage.”
Pointing to $500 million of strategic investment secured by Mindbody as part of the deal, Lanman added that he believes investors are betting on the wellness industry as a global macro trend for the next 30 years.
“The industry is bouncing back super fast,” he said. “I see this huge tidal wave coming of people interested in wellness. How many stick with it will largely be dependent on how much friction we can remove from that process in finding and booking experiences that cater to their tastes and interests.
“Don’t just take our word for it. Look at the fact that there’s $500 million of fresh financing coming into the companies as part of this deal. You can rest assured that people who are writing those size cheques do a lot of due diligence. They like what they see.”
$500 Million Strategic Investment
The $500 million of strategic investment secured by Mindbody in conjunction with the acquisition comes from a group led by Sixth Street, a leading global investment firm. Prior Sixth Street investments include Airbnb, Datavent, Legends, MDLive, NBA basketball team San Antonio Spurs, Spotify and Sprinklr.
McCarter explained that this investment, together with the continued support of Mindbody’s majority investor and partner, Vista Equity Partners, would help further accelerate the company’s growth and drive product innovations and investments made over the course of the pandemic.
These milestones include the creation of an integrated virtual platform to support business owners deliver hybrid classes, and enhancements to Mindbody’s marketing automation tools to improve client acquisition and retention.
The investment will also power the newly introduced Mindbody Capital, similar to that offered by Shopify and Square, that will give small business owners access to financing to help them invest in and grow their business.
For ClassPass, Lanman said the investment would further bolster the company’s corporate programme, expansion into more cities and countries, and especially broaden its offering of spa and salon services.
“ClassPass has pushed aggressively into spa and salon,” Lanman said. “That’s new for us. Mindbody has been doing that for a long time, so that was another part of the attractiveness of this combination.”
“As a customer and user of both Mindbody and ClassPass for several years, I know how impactful the combination of these two powerhouses will be on the industry as it regains momentum,” commented Bryan Myers, President and CEO of [solidcore]boutique fitness.
ClassPass Founder Payal Kadakia to “pursue other passions”
As part of the announcement, ClassPass revealed its founder Payal Kadakia would be leaving the company after a decade of service. “Payal has made the decision to move forward and pursue some other passions after 10 years of building ClassPass,” the company confirmed.
“She is so proud of reaching this incredible milestone, especially as a female-founded unicorn, and excited about the coming together of ClassPass and Mindbody to help bring wellness to even more people around the globe.”
In 2017, Kadakia nominated Lanman as CEO of ClassPass and became Chairman of the Board, and in January 2020, ClassPass completed a $285 million Series E round of funding that catapulted the 2013-founded company to unicorn status, with a valuation over $1 billion.
Commenting on the acquisition, Kadakia said: “Since the founding of ClassPass, our north star has always been how we can help people discover and seamlessly book soul-nurturing experiences.
“This acquisition will be a massive milestone for a female-founded company and I am confident in the leadership of Josh McCarter and my long-time business partner Fritz Lanman to propel the business forward and continue delivering a best-in-class experience for consumers and business owners alike.”