The health and fitness industry has seen its fair share of mergers and acquisitions over the years. The majority of those deals have been between fitness groups, or between fitness operators and larger leisure plcs eyeing a more diverse portfolio ­– but one recent business deal appears to mark a new departure for the sector.

Leisure management company DC Leisure, which operates leisure facilities for almost 30 local authorities across the UK, was taken over by housing giant Places for People in December 2012, for an undisclosed sum.

One of the largest property management, development and regeneration companies in the UK, Places for People ­– a not-for-dividend organisation with over £3bn in assets – currently owns or manages more than 80,000 homes in 230 local authorities.

It’s believed to be the first time – in the UK at least – that a housing provider has taken over a leisure company. However, given the way the market is moving, with fitness facilities reaching out from their sealed boxes into more parts of the community, perhaps it’s not so much a surprise as a sign of things to come.

Adding value
The chief executive of DC Leisure, Steve Philpott, and his new boss, the chief executive of Places for People, David Cowans, certainly see it as a mutually beneficial deal.

“Places for People is an owner that understands local government and community development – and that’s essentially what we’re about too,” says Philpott. “But it had no leisure provision and no understanding of leisure and that’s what’s exciting both for Places for People and for us. The company has taken us over to deliver that and to expand, which is obviously a very positive situation for everyone in the organisation.”

David Cowans sees the deal as an opportunity to enhance and add value to the Places for People (PfP) portfolio, which he says is both “socially and commercially” driven.

“We are a place-making business, so we’re always looking for opportunities to add value to existing places,” says Cowans. “For example, we established a chain of nurseries alongside some of our housing developments. It wasn’t that we particularly wanted to go into the nursery business, but we have listened to what people were telling us they wanted.”

Bigger pond
It may be natural to assume that the bigger organisation approached the smaller one, but in fact, says Philpott, the deal came about because DC Leisure was actively looking for a company to take it over.

While it may be some time before we see leisure integrated into PfP developments, the direct benefits of the takeover to DC Leisure (now a subsidiary of PfP) were instant, with the company immediately able to go out and bid for more contracts.

Philpott says: “We were looking for the right kind of buyer and it was an approach we made to PfP. When we started to talk to them about it they absolutely understood the fit and were extremely excited about what we could do together. Because we are now owned by a not-for-dividend organisation, with no shareholders, it means we will be competing for contracts on a level playing field with the leisure trusts.

“That’s been a serious handicap to growth over the last four to five years. Before we were operating with a significant tax disadvantage. It meant that we’ve had to tread water in the past few years and remain static in terms of the number of councils we work with and number of sites we manage.”

So does that mean that big changes are afoot at DC Leisure? According to Philpott, yes…and no.

“In terms of our organisation and the way we’re structured and everyone’s individual roles it’s pretty much business as usual,” he says.

The only visible changes have been the replacement of two of DC Leisure’s non-executive board members – a part-time chairman and a representative of the company’s previous owners – with the PfP group chief executive David Cowans and group chairman, Chris Phillips.

Business credentials
The main change will be the significant growth opportunities that come from the backing of a bigger player.

In the immediate future, says Philpott, DC Leisure is recruiting to expand its business development department to bring the required capacity to cope with the expected new flurry of tenders.

Cowans adds: “We are very keen to see DC Leisure thrive and succeed as it bids for contracts; it now has the strength of the group behind it.”

Philpott is no stranger to acquisitions. In the 1990s, he was marketing director for Whitbread, where he was charged with looking into the broader leisure market. It was Philpott who persuaded Whitbread to buy David Lloyd Leisure. He led the acquisition of DLL in 1995, running the health and fitness operator for five years before joining DC Leisure as chief executive in 2003 as part of a management buyout from the original owners.

He’s also been involved in a number of successful businesses, including the creation of Energie Global Fitness Management with Jan Spaticchia (Philpott remains a shareholder).

Places for People started life as a housing association in 1965. While it still has a housing association in the group, PfP now builds and runs large scale developments in areas of need, involving the regeneration of existing sites and the building of new ones.

David Cowans has solid experience in the housing and community sector, having been the housing director and also director of public affairs for Birmingham City Council before joining Places for People in 1997.

Developments are usually a mix of commercial and social housing, with some properties offered on affordable rents, alongside other key facilities such as retail, social care, new infrastructure and new schools.

Cowans says: “You really have to listen to what people want. More and more it’s about the life experience of a place – a sense of community, feeling safe, family facilities and so on.”

People and environment
It has clearly been on an ambitious expansion track over the years, but quality appears to remain at the heart of what Places for People does.

PfP invests millions into the research and development of low carbon technologies for both its new and existing homes each year.

In 2010 it became one of the few in its sector to be awarded ISO14001, which recognises the organisation’s commitment to reducing the impact of its business on the environment, and its development of an effective environmental management system.

In 2012 it also achieved a Platinum award in Business in the Community’s CR (corporate responsibility) Index, putting it in the top 57 UK companies in this area – an indication of how it treats its staff, and its customers.

DC Leisure, which handles 25 million leisure visits a year, takes its social and green responsibilities just as seriously. The company sources most of its electricity from sustainable resources such as wind and hydro generation, for example.

Philpott says: “We would see ourselves – and others in the sector would see us – as one of the best operators of local authority leisure centres, and they would say that because of the quality of our staff and team, their training and the focus on improvement.”

Cowans adds: “DC Leisure shares the same spirit as us – the management team has a can-do attitude and a similar approach to value creation and customer service. It’s a great cultural fit and I see a lot of synergies between the two companies.”

While both companies are well aware they’re not going to change the housing and leisure development landscape overnight, the acquisition did come just ahead of rather auspicious times.

Health agenda
The beginning of April 2013 saw the official launch of the Health and Wellbeing Boards, which see local authorities taking charge of NHS funds, and directly delivering healthcare initiatives in the community.

With no fixed guidelines, each board will develop its own way of operation and delivery going forward ­– making it a blank canvas for companies like DC Leisure and PfP to play their part in community wellbeing in the future.

Philpott says it’s a major change and a major challenge – and one that the newly reinforced DC Leisure should be well equipped to take on.

“Without doubt any leisure offering is a very important part of community health and wellbeing, happiness, and social cohesion. We’re not just about sport and physical activity – we do an awful lot of stuff around community and cohesion – keeping kids active and off the streets, for example, which has a crime prevention element.”

As it works with almost 30 councils, DC Leisure will now have almost the same number of Health and Wellbeing Boards to forge a relationship with.

It has already been well ahead of the game, creating a dedicated liaison role four years ago. The person in the post is currently Susan Rossetto, who was previously in a public health role at Weight Watchers.

Philpott says: “What’s happening with healthy living is really exciting and the leisure industry is increasingly being seen as a legitimate part of the public health and sickness prevention programme. We’re now in the phase where we need to convince people that the money is well spent. Can we prove to them that £1,000 investment in us is better than £1,000 in something else that might also have a health outcome?”

Building change
For PfP, all this represents new ground – although as an organisation it seems receptive to new ideas and paths.

The organisation’s small international division studies overseas examples of good practice in community cohesion, while Cowans speaks at a minimum of four international conferences a year.

“We’re always looking for the next idea; the next thing to add value to what we do,” says Cowans. “We can learn as much from the bad examples as from the good ones.

“For example, look at the way US homeowner associations run leisure facilities in their communities. Is that a good idea? Yes. Would it work in the UK? I don’t know. But these things are always worth exploring. Now we have DC Leisure, we have the expertise to look at possibilities that we haven’t touched on before.”

Future plans are very much pre-drawing board, with neither side being able to go into specifics about how the housing/leisure mix might develop, but it’s clear that the union will be even stronger than the sum of its parts.

“Every individual part of the group is strong in its own right, and when you combine all these strands together you have something unique,” says Cowans of the partnership.

For DC Leisure, while it’s still business as usual, the future could see housing and leisure merging on a much grander scale.

Philpott says: “We’re very comfortable with what we offer and don’t need to change what we do to deliver the expansion. But that said, we are constantly innovating and changing what we do. We can’t change things overnight in terms of housing and leisure coming together, but the future holds enormous possibilities.”