Eric Roza joined the Pursuing Health podcast and provided some key insights Tuesday into the role of Berkshire Partners within the CrossFit organizational structure and their involvement in the operations of the company. The Boston-based private equity firm joined forces with Roza to purchase CrossFit from Greg Glassman.
One big thing: Roza laid out the process of how Berkshire Partners came to be a part of the acquisition, including their future involvement in the newly formed board of directors, and was quick to dispel the notion that Berkshire, or anyone else, was secretly in control of the company and not in it for the long term success of the company.
- “My first intuition was, I had a couple Financial Partners I’d already talked to about the deal and I decided I’m not going to have them in the deal right now,… I want to control the way this whole thing works, it has to be native to what’s authentic to me but I also don’t want to put a lot of process and friction into this thing with a big investment firm out of the bag, they can come in later.”
Berkshire Partners were brought into the fold once most of the deal was already done, giving them a more hands-off approach to the acquisition and decision-making process going forward, which according to Roza means that Berkshire’s involvement is an intentional “long-term time horizon.”
- “The way that will manifest in the near-term would be ‘well you know… we want to build all these great apps for CrossFit as an example and do all this great technology to help the boxes run their businesses better, but COVID is worse than we thought so let’s wait,’ that would be a more of a short-term outlook like you have to hit these numbers in the short-term that’s not the investors we have or the board that we have.”
- “This gets back to my decision to kind of do a lot of this transaction on my own, I got to say ‘look this deal’s all but done, we’ve announced it publicly, would you like to be part of it, here’s what it looks like,’ versus let’s partner on the front end and figure out together how we want to do this deal.”
CrossFit’s Board of Directors was revealed to include seven members, with the possibility of adding an eighth member in the future. Interestingly enough, Roza and Berkshire Partners only occupy three of the seven seats, meaning that the voting majority of the board will be made up of “independents,” or members who are neither employed by CrossFit or the investment group.
- Roza made it clear that he would still be the leader of CrossFit LLC. and would ultimately be the one driving decision-making at the top of the company. On multiple occasions he reiterated his plans to lead CrossFit for the rest of his life.
“The role of the board is what’s called governance, it’s not to lead the company, it’s to help me think about leading the company, and to challenge me, and to coach me and cheer me on, and to make me better and to call me out on my own B.S. and frankly to be there again as this independent governing entity to make sure we’re on the right track for the long term. Everybody has self-selected in, including our lead investors, Berkshire Partners, knowing my long-term aspirations to lead this business for the next 50 years….and they’re all in on it.”
A CrossFit HQ spokesperson reiterated Roza’s statement: “The CrossFIt board will initially have eight voting seats, and we’ve filled seven of them so far. In addition to two Berkshire partners and Eric, we have four great independent board members. The Board’s role is to help us build CrossFit into the world’s leading platform for health, happiness and performance, with a long-term perspective in mind. They will not be involved in any day-to-day decision making. We were fortunate to have a number of great choices as investment partners. Eric specifically partnered with Berkshire as lead investor given their long-term perspective on value creation, their track record of being a great partner for companies such as Asurion (where Eric used to work), their commitment to our vision for CrossFit, and Eric’s personal relationship with Berkshire Managing Director Ross Jones, whom he has known for 30 years. We will be formally introducing our other board members in the coming weeks.”
Why this matters: Word of Berkshire Partners involvement in the sale raised some eyebrows amongst the community who were justifiably nervous about an “outsider” investment firm having some ownership of the company and potentially being in the driver’s seat of a CrossFit ecosystem.
- Back in 2014 the community was left with a sour taste in it’s mouth after Anthos Capital attempted to buy CrossFit co-founder Lauren Jenai’s 50% stake in the company, before Glassman took legal action that allowed him to purchase his ex-wife’s stake giving him full ownership of the company.
- Affiliate growth in 2014 was at an all-time high, and it was believed that Anthos Capital would eventually try to oust Glassman from his seat at the head of the company, and drastically re-work the company structure and do away with the affiliate system that was the backbone of the company.
Listen to the entire interview on the Pursuing Health website.
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