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Monday
Aug112014

Women-owned wellness companies merge to form stronger brand

Allison Flatley, left, Brenda Loube, center, and Sheila Drohan.In late March, two women-owned, IHRSA-member companies confirmed, unequivocally, the dramatic and positive impact that women are having on American business that’s detailed in The 2013 State of Women-Owned Business Report, commissioned by American Express OPEN.

Corporate Fitness Works (CFW), based in St. Petersburg, Fla., announced that it had acquired L&T Health and Fitness (L&T), which has its headquarters in Falls Church, Va., for an undisclosed sum.

Both are leading providers of management and consulting services in the corporate health and fitness market. For 2013, CFW reported that it had revenues of $5.4 million and more than 200 employees, 150 of them full-timers. L&T had revenues of nearly $10 million, 372 employees, 141 of them full-timers, and, since 2000, had been ranked one of the “top 100 fitness companies” in the U.S.

The acquisition nearly tripled CFW’s size, and gave it a solid presence in 19 states and the District of Columbia.

“It’s the kind of deal where the little fish eats the big fish,” observes Allison Flatley, formerly the COO of L&T, and now the COO and part of the ownership team of the combined company. Flatley is also a member of IHRSA’s board of directors.

Converging interests

While mergers and acquisitions aren’t an uncommon theme in an economy still recovering from the great recession, there are a host of factors that make this one unique. Both companies had been founded and were still owned by women; the two were “friendly competitors”; they shared similar missions, values, and cultures; and, given the fact that both had been in business for more than 25 years, the owners of each were wondering what to do next.

L&T was founded in 1984 by Susan Liebenow, who served as president, and Susan Torok, the senior vice president, who had met at American University, in Washington, D.C., where Liebenow was an adjunct faculty member, and Torok, a student. Flatley was also an adjunct professor there. All three were also avid sportswomen: Liebenow (tennis, golf); Torok (tennis); and Flatley (running, softball).

CFW was founded four years later, in 1988, by Brenda Loube and Sheila Drohan.

Liebenow and Loube had gotten to know one another quite well in the late ’70s, when Liebenow was the women’s tennis coach at Georgetown University, in D.C., and when Loube founded the cardiac rehab department at Georgetown University Hospital. The two teamed up to help one of Loube’s patients who wanted to play racquetball at the Georgetown University Field House.

“The respect we had for each other,” says Liebenow, “along with our shared values and mutual trust, played an important role in the transaction.”

Both businesses had evolved,  learned, and grown, becoming major players in the corporate fitness sector. Taken together, their client list encompassed a number of industries, including financial institutions, pharmaceutical corporations, manufacturing and technology companies, federal and state governments, non- profit organizations, retirement and residential communities, hospitals, insurance carriers, and the military.

Among their blue-chip customers are companies such as Cigna, Kaiser, Armstrong, Humana, MasterCard, ExxonMobil, and UnitedHealthcare.

As, over the years, the corporate health and wellness market had established and entrenched itself, and quickly expanded, it had become increasingly competitive. “Back in the ’80s, when we bid on a contract, we’d be competing with two or three providers,” reflects Liebenow. “But now, there may be 10 to 15 in the early rounds, and the competition is so much more diverse, including health clubs, nonprofits, hospitals, and insurance providers.”

By 2013, when Liebenow and Torok had accumulated a total of more than 60 years in business, both were taking a good hard look at retirement. Loube and Drohan had briefly considered the same possibility, but quickly decided they weren’t ready to pick up the golf clubs just yet. Instead, they begin to take a serious look at opportunities that would allow them to build their business. 

Washington Golf and Country Club, a Corporate Fitness Works client.In February 2013, the small fish, CFW, contacted the big fish, L&T, to see if it was interested in being acquired.

For L&T, it was not an entirely new notion. In 1989, Liebenow and Torok had sold their company to a larger firm, and then, in 1996, purchased it back. “Since we’d been there already, we knew what to expect,”

Liebenow recalls. “When we agreed that it was time to sell, and that CFW was a perfect partner, we were ready to make it happen.

“It was especially helpful that our COO, Allison Flatley, was completely on board,” notes Liebenow. “She was actively involved in the discussions, and played a key role in making the transition as smooth as it was.” Observes Drohan: “Since we were both women-owned businesses with similar cultures and values, and shared the same geographic footprint, it seemed like a perfect fit.”

Combined aspirations

That “perfect fit” concept has since become the mantra of the new company as it prepares for the road ahead. The perspective from both sides is that the integration process is going smoothly, and the management team - Loube, the president; Drohan, the CEO; and Flatley, the COO - anticipate very few bumps in the road.

But whenever you’re merging two established businesses that are used to doing things a certain way, and that have established their own cultures and brands, there are inevitably issues that have to be worked through. “The biggest concern we have right now,” says Flatley, “is that we’re operating on two technology platforms, and our communication tools are different.”

She cites as simple, but emblematic examples, the fact that CFW refers to its employees as “team members,” while, at L&T, the equivalent term is “service leaders.” And, while at L&T, “risk management” refers to operating within established industry guidelines, at CFW, it refers to business risks, licensing, and liability issues.

“Our goal, from the beginning, has been to make the transition as seamless as possible for our clients, employees, and suppliers,” explains Flatley. “We’re taking our time during this initial phase, and conducting business as usual for both companies, while addressing priorities such as payroll, benefits, and the employee on-boarding process.”

Picking up on the thought, Drohan adds, “We’re looking for the best of the best in what each company brings to the table. What we utilize moving forward might come from one or the other, or we might create something entirely new. We’re still in the discovery phase, and it’s an exciting time for all of us.”

When two companies become one, the salient questions to ask are why did they do it, and how will the whole become better than the sum of its parts? In this case, however, you don’t have to dig very deep for compelling answers to emerge.

Loube answers the Why did we do it? question by pointing to some of the commonalities the two share as women-owned businesses. “We have similar approaches to the way we nurture and build our service team, establish and maintain relationships with our client base, and work with our supplier partners,” she says. Now, she suggests, the business is better positioned to deliver on its goal of providing exceptional, hands-on service, which is particularly important given that 95% of its revenues derive from on-site facility management; the remaining 5% is produced by wellness services.

The company’s expanded footprint, particularly in the Midwest, South, and Mid-Atlantic regions, puts it among the top five corporate management groups in the country, and positions it to better serve an increasingly mobile and geographically diverse employee population.

Another advantage of maintaining the women-owned status is offered by the supplier diversity program, which encourages the use of companies owned by minorities. “It hasn’t played a big role in increasing our business up until now,” Loube acknowledges, “but I see that changing over the next five years.”

Supplier diversity programs have afforded them access to larger corporate clients than they might have had otherwise, notes Flatley, who sees it as a growing trend moving forward.

“We see this as a time of great opportunity, for us and the industry,” Loube continues, citing, as an example, the Affordable Care Act (ACA). “It’s increased employer awareness of the need to integrate wellness solutions into institutions,” she reports. “They’re beginning to regard providers like us as a strategic solution. It’s not as hard a sell as it used to be.”

“The alternative wellness program provision within the ACA opens the door for health clubs, third-party providers, and a wide range of healthcare-related businesses,” Flatley points out. “This provision makes it possible for us to approach smaller companies with services such as health fairs and health-risk assessment screenings, as well as Fortune 500 companies, where we can market our expertise at on-site facility design and management.”

Though Liebenow is now officially retired, she’s still following the game. “Now, with all the uninsured people entering the healthcare system, physicians and healthcare professionals won’t have the time they need to talk to clients about wellness and disease prevention,” she says. “That’s where our industry can step up, and become an essential and respected presence in the healthcare continuum.”

As the new team of industry veterans gears up to deal with the future, it’s clear they’re in no hurry to get there - but when they do, it’s equally clear that they’ll be ready. It seems they have all the right pieces in all the right places. The timing of the acquisition appears providential, as the economy is stabilizing, employers are beginning to hire again, and incentives for building a healthy workforce are driving the demand for the services the merged business provides.

“There’s one meeting that we haven’t had yet,” concludes Loube. “It’s the one where we sit down and discuss all of the possibilities, all of the potential - which is literally endless. It’s too early to discuss that now because we have other priorities. But when the time is right,” she says with barely contained enthusiasm, “I can’t wait to take part in that meeting!”

– Stephen Wallenfels, stephenw@stephenwallenfels.com

 

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