The negative impacts of the Covid-19 pandemic cannot be overstated and have touched nearly every industry and person in the world. In sports, these negative impacts have been most readily observed through the temporary shutdown of both professional sports, and more locally, recreational team sports. However, Covid-19 has had an unexpectedly beneficial impact on one sector of the sports industry - individual outdoor sports. With many gyms still closed or operating at reduced capacities and many fitness classes on pause, sports enthusiasts are rediscovering the appeal of outdoor activities such as golf, cycling, hiking, fishing and more, all of which can be enjoyed while maintaining appropriate social distancing. This heightened activity is driving positive economic impacts, which couldn’t be coming at a better time, with golf brands exploding in value, sneaker companies benefitting from the start of a new running boom, and cycling becoming so popular that there’s a shortage of bikes available for purchase. And these are just a few examples of the positive impacts stemming from a resurgence in the popularity of outdoor sports. Consolidation This growing popularity presents a unique opportunity for private equity and strategic buyers. After all, the outdoor recreation market is massive. According to the Bureau of Economic Analysis, the U.S. outdoor recreation economy accounted for 2.2% of U.S. GDP ($427 billion) as of 2017. Even before the pandemic changed everything about sports, the outdoor industry was a powerhouse. Now, as a result of this massive uptick in popularity, the industry is ripe for increased M&A activity that could drive industry consolidation. Private equity firms were already sitting on historic levels of investable “dry powder” at the start of this year ($1.5 trillion, according to CNBC), and this capital will need to be deployed for these firms to continue to raise new funds going forward. These funds are no stranger to the outdoor recreation space, either. Private equity has been a driving force behind the expansion and consolidation of rock-climbing gyms throughout the U.S. Rock climbing used to be much less of a mainstream sport than it is today, and indoor climbing gyms were traditionally independently owned and operated enterprises. But now that rock climbing is a soon-to-be Olympic sport, facilities are sprouting up across the country, powered by private equity investments that have been consolidating ownership and cashing-in on the returns offered by the sport’s growth. A prime example of this consolidation was Tengram Capital Partners backing the formation of El Cap, which through its consolidation of the Earth Treks, Planet Granite and Movement Climbing + Fitness brands became one of the largest operators of indoor climbing gyms in the world. Also last year, Pike Street Capital took a major stake in Head Rush Technologies, a maker of best-in-class equipment for the climbing and adventure industries. Strategic buyers are also well positioned to expand their outdoor sports holdings to capitalize on the surge in sales. For instance, VF Corp., the owner of outdoor brands such as The North Face and Vans, has publicly indicated it is looking to take advantage of the potential for great returns through acquisition activity, despite Covid-19 concerns. Pandemic won’t slow dealmaking Although the majority of these deals will not be the multibillion-dollar range common for mainstream professional sports, as the industry continues to grow that could change. More golfers, more cyclists and more climbers will inevitably increase the size of this market and the opportunities associated with it. After all, it wasn’t long ago that fitness studios like SoulCycle and Orangetheory were the new kids on the block, and as fitness class popularity grew, that drove investment and now billion-dollar valuations. That demand for sports and fitness is still there. We’re still early in this cycle. The growth in individual outdoor sports has only taken off in the last few months as the effects of Covid-19 have spread nationwide. But, paired with the need of private equity firms and corporations to deploy capital and their desire to capitalize on rare opportunities for outsized returns, we expect this growth to fuel increased M&A activity across the industry going forward that will result in further consolidation across outdoor sports. -- Mark Kurtenbach, partner, Hogan Lovells, contributed to this article.