Closed Deals: Spa Trouble Leads To Goldin Opportunity –

When someone wants to look and feel better about themselves, the neighborhood spa is a locale that will happily indulge their every aesthetic desire. But what happens when the spa, itself, becomes the thing in need of a makeover?

In March, when the financial blemishes of Skin Nuvo International LLC were identified as being beyond simple cosmetic repair, the Henderson, Nev.-based operator of nearly 40 spas in the Western U.S. filed for Chapter 11. Private equity firm Goldin Capital Management, however, saw beauty behind the financially distraught beast, and placed the winning $5 million bid for the bankrupt company’s assets.

“We saw it as a very attractive turnaround investment opportunity where there was a four-wall structure in place and problems that we could solve,” Lawrence Krule, a managing director at Goldin, told Buyouts. “We thought the business model of the company is a very good concept, and with the proper capitalization, protocol and management, it can be expanded to become an industry leader.”

Skin Nuvo was a three-year-old company that operated 37 medical spas located in malls and shopping centers in California, Nevada, Oregon and Washington. Krule said “a significant percentage of [Skin Nuvo’s] revenues came from laser hair removal and skin rejuvenation procedures.” According to SpaTrade, an online trade publication, the chain’s troubles began when two Skin Nuvo sites “badly burned” two women during laser hair removals-separate incidents that spurred critics to scorn the entire company for having “too few medical directors stretched too thin over too many properties.”

When Skin Nuvo filed for bankruptcy, it estimated that both its assets and debts were worth between $10 million to $50 million.

Now, about two weeks after the bankruptcy deal’s close, New York-based Goldin is spearheading a re-branding campaign to see that the assets are once again profitable. The firm capitalized its new venture, renamed Lumity, with a total of $15 million to rebuild the business from the ground up. “In this case, since we purchased the assets, it’s not so much repairing old balance sheets as it is creating new ones,” Krule said. In addition, Goldin is bringing in “seasoned industry management [led by industry veteran Francis Acunzo]; a group of medical professionals proficient in dermatology and skin care; and networked, point of sale, skin-care equipment,” he said.

Krule noted that the spa sector in the U.S. is a $10.7 billion-a-year industry, and, within that, the medical spa niche has experienced 133% growth over the last five years-more than any other spa type. “We believe that the trend toward utilizing developing technologies to provide services that were previously available only to an exclusive clientele, but that can now be made available to a wider demographic profile, is at least partly behind the growth in this sector,” Krule said.

In addition to laser hair removal and skin rejuvenation, services that Lumity provides include Botox and Restylane injections, facials, microdermabrasion and resurfacing peels. The new company will also continue the sale of various lines of cosmetic and skin products that were previously sold by Skin Nuvo.

Though Goldin’s specialty is in the financial and operational turnarounds business, Krule said that the Skin Nuvo/Lumity investment is one that the firm would like to hold on to in order to exploit the company’s growth opportunities once it has a stable business model in place. “We expect that this will be an intermediate-term investment for us,” he said.

Snapshot

Target: Skin Nuvo International LLC

Buyer: Goldin Capital Management LP

Price: $5M

Financial Advisor: Skin Nuvo: Camino Real, LLC

Legal Counsel: Goldin: Mayer, Brown, Rowe & Maw LLP; Skin

Nuvo: Akin Gump Strauss Hauer & Fled LLP