Testing His Endurance
Edited by John E. Morris for The Deal.com
David Moross' plane touched down in Phoenix in time for the P.F. Chang's Rock 'n' Roll Arizona Marathon this month. But Moross came not as one of the event's 36,000 competitors, but as a sports dealmaker.
"Rock 'n' Roll" is organized by Elite Racing Inc., one of the three endurance sports companies that Moross' New York buyout firm, Falconhead Capital LLC, recently acquired.
"I like sports myself. I do run and am very active, but, seeing me, I don't plan on running a triathlon or marathon," laughs Moross, 49, the chairman and CEO of Falconhead. "We're here because we just bought the company."
On Jan. 7 Falconhead announced the launch of a new platform called the Competitor Group Inc., which has acquired Elite Racing, La Jolla Holding Group LLC-better known as Triathlete magazine??-and Competitor Publishing Inc. Sources place an approximate value of $60 million on the deal, of which $25 million was equity.
Elite, based in San Diego, organizes races, including triathlons. Competitor Publishing produces a number of regional sports magazines, and Triathlete Magazine is one of the leading publications for the sport. CGI, the platform company, has a total magazine circulation of 500,000 and estimates that its race will draw in more than 150,000 participants.
Moross clicks off stats that back his vision: Triathlons are a $1.3 billion industry and growing; membership has risen by 23% since 2002 and is now growing by 35% a year, according to USA Triathlon, the sport's official governing body.
Moreover, the demographics "are highly attractive to marketers," says Moross, noting that the average household income for triathletes is $160,000.
"Where we see big value is where we can harness all customers who read these magazines. It's all about being able to spend more money and get folks to buy things," he adds. Revenue comes from entry fees, sponsorship, TV, merchandise and fitness expos.
Moross, a native Brit, didn't plan on a career in the sports industry. He had been an analyst at a mutual fund company and at a life insurer and later was president and chief executive of Kalvin-Miller International Inc., an insurance brokerage.
Between 1995 and 1998, as chairman of Ins??co Inc., his own investment consulting company, he did work for clients such as talent and event management agency International Management Group, now IMG, film producer DreamWorks SKG and CBS Corp.
He launched Sports Capital Partners LLC, a New York investment fund, in 1998 with Chase Manhattan Corp. and IMG agent Mark McCormack, an IMG co-founder who represented sports and celebrity figures such as Tiger Woods, Tyra Banks and Derek Jeter.
Sports Capital Partners' first fund focused on companies that are a hybrid of sports, media and entertainment, taking stakes in Tickets.com Inc., Small World Media, Sports.com Ltd., Sports??YA.com and the Golf Warehouse Inc.
In 2002 Moross and McCormack renamed Sports Capital Partners Falconhead. When McCormack died the next year, Moross bought his stake.
Moross acknowledges that the dealmaking environment has become challenged by the credit crunch, but so far it hasn't affected his niche.
"In the lower middle market, we're still seeing ample leverage available," he says. "You do have a compression in that area. The question is when will it trickle down. We're in no immediate rush; we're well invested in four deals."
In good times and bad, Moross remains optimistic that endurance sports fanatics will keep training and racing.
"I think there will be some wonderful buying opportunities, assuming consumer wisdom is correct," Moross says.