Bigger and Better, Market by Market

As president and CEO of Cygnus Business Media, Paul Mackler is orchestrating its growth into an integrated media company that can sell products and services in 15 different markets and over a variety of media. When his company, CommerceConnect Media, and ABRY Partners bought Cygnus in June 2000 for $275 million, it was comprised of 60 Web sites, 48 trade magazines, 17 custom publications and 16 tradeshows. Over the past four years, with a growth strategy balanced between launch and acquisition, Cygnus has added 34 tradeshows, 19 magazines, 11 industry directories and eight Web sites. Mackler spoke with Tradeshow Week Associate Editor Margo McCall recently about how he managed to grow the company — during a recession, no less — and how tradeshows fit into the company's future.

Question: When you and ABRY Partners acquired Cygnus Business Media in June 2000, the B-to-B world was a much different place. How has Cygnus fared during the recession?

Answer: We really did quite well, despite what was the worst B-to-B media market in 50 years. The trade publication market declined by 35 percent in '01 and '02 and tradeshows by about 10 percent. Clearly it was a very difficult two years, and even '03 was really flat.

We saw our revenue grow by 7 percent on a compound annual basis from '99 right through this year. The only year we saw revenues decline was '01. We've done even better on EBITDA, and profit growth has been double digit.

Q: How did you manage that?

A: One, we have market diversification. We view that as a big strength. When you're only in one market you have to make sure the market does well. We cover 15 different markets. Our largest market doesn't represent more than 15 percent of our revenues.

We are revenue-diversified as well. We're not overly dependent on tradeshows or advertisers or online. The third thing is we have leading market positions in all of our markets. When there is a downturn, there is a flight to quality.

Q: What kind of goals do you have for Cygnus Expositions?

A: We have a culture of collaboration within Cygnus that really promotes cross-selling and goes all the way out to the customer. In order to do that, you have to have the products. When we acquired Cygnus, tradeshows represented 7 percent of total revenue. We have more than doubled that. We've really grown from a handful of shows to 50 annual events. That's quite an accomplishment over a short period of time.

Q: Cygnus Exhibitions seems to have a lot of smaller, regional shows. Why is that?

A: We like the regional show model. This is a model that's working very well. I'm not suggesting for a moment that large shows are a thing of the past. The consumer electronics show is an international and successfully run major event. But we see a large percentage of tradeshow exhibitors and attendees wanting to make sure their costs are in line; that the convenience is there and the ROI there. They like the value they get from regional shows.

We went through the recession, 9/11, a war, the SARS epidemic, then another war. Throughout it all, regional shows have really shown their stability and their value.

Q: Several companies seem to be moving toward the Gartner model, with small, targeted events that go after the high-level buyer. Is that model of interest to you?

A: It will not work in every market. In certain markets, it does. People are looking for new solutions. That's why I think it's important for companies to go to the customer, and understand their needs and objectives. Whether you custom-design a media solution, offer print media, live tradeshow media, custom marketing or interactive online, what the customer has to see is a wonderful value from a company.

Q: What about corporate events? Do you view them as a threat to tradeshows?

A: I read somewhere that corporate events have been growing in importance. Corporate events have been around for a long time. I think they're just another part of the market mix. I've never subscribed to the premise that one marketing vehicle should replace another one. While some may take exception to that, it's working real well for us.

Q: Lately, a number of B-to-B executives have won the financial backing to start their own companies. What about the current environment makes this the right time for that?

A: There's a lot of private-equity money that sees the industry as an attractive one, with strong cash flow and sustaining recurring revenues. These are the things equity investors like.

Quite frankly, I think there was more entrepreneurial spirit 20 years ago when I got into the business. There were more privately owned companies in the tradeshow industry than there are today. This industry was built one show at a time, one magazine at a time.

Q: A lot of those entrepreneurs have come from Reed Exhibitions. Why do you think that is?

A: When people go into a large corporate environment, they either are looking for long-term careers — and they'll find that in a large company — or they're looking to do something else and find themselves dissatisfied with the ability to achieve their goals and end up leaving. I don't think that's new.

Q: Do you have an exit strategy for Cygnus Business Media? Either a sale or an IPO?

A: An IPO is really just a funding mechanism. We don't really have any problem raising funds. As long as we can get good terms on the banking market, the way we view it is just as a funding mechanism. We have very good partners. ABRY Partners has been an excellent partner. They're a major player in the media space now.

Q: Do you have a business development team to help you figure out which shows to launch?

A: We have a business development person to handle acquisitions. On the launch side, we really tap into our existing staff—from show managers to editors and publishers.

Q: What are the pros and cons of launching shows compared to acquiring them?

A: For us, it is typically less expensive to launch than it is to acquire. But sometimes acquiring is the way to go when you want proven brand strength. In some cases where we'd like to expand very rapidly, we're going to look to acquire. It gets you into that marketplace very quickly.

On the other hand, we'll launch if we're not in that much of a rush to get into that market, or where there's nothing available to acquire, or it's positioned differently or in a different geographic location.

Q: How do you decide when and where to launch or ac-quire shows?

A: We look at the markets we serve where we don't yet have shows. We do a lot of talking to the marketplace and try to identify underserved or poorly served niches.

Of our 15 markets, we now cover half with shows, where a few years ago it was only three of the markets that we covered with shows. We just finished launching a photo show. It was a great show and it complemented our existing digital photography magazines. We're launching a security show with Infinity Expo. We've done launches in the kitchen and bath and jewelry areas. Over the last year, we've acquired literally dozens of construction shows and aviation shows, all complementing our existing portfolio.

Q: How is the current climate for mergers and acquisitions?

A: The economy is rebounding, which helps. It's been an uneven recovery but it's been a recovery nonetheless. As the market recovers, we are going to see more M&A.

Q: Are there more attractive properties on the market now than a few years ago?

A: That's what M&A advisors will tell you. The proof will be in the pudding. As the market recovers and the industry recovers and the banking community and lending community have loosened up, there's a better borrowing environment. It's inevitable that M&A will pick up. Will it be infinitely robust? That remains to be seen.

Q: Are there other markets you plan to expand into?

A: We're perfectly content being in 15. If we found an attractive market, we'd go into a 16th. But our growth does not depend on it. Our growth depends on further expanding our footprint in each market we're in.

Q: What are your long-term goals for Cygnus?

A: Clearly what we want to do is continue with the vision we embarked on in 2000. Our growth strategy is based on bigger and better within each market we serve, and becoming more important to customers and offering them solutions.

Q: You've had major leadership roles in both SISO and IAEM. Do you ever see the day when the two associations will merge?

A: I think it will be an interesting debate for years to come. Whether they merge together or not is less important in my view than in them pooling their resources.