Financial Investors: Private Equity Jostles for Deals

By Margo McCall -- Tradeshow Week, 2/14/2005

Suddenly, financial players left and right are interested in plunking their money into tradeshows.

Private-equity firms have always had a strong presence in the industry. Advanstar Communications, producer of 39 tradeshows, is backed by DLJ Merchant Banking Partners, the private-equity arm of Credit Suisse First Boston. Veronis Suhler Stevenson's VS&A Communications Partners has funded Access Intelligence, Ascend Media, Canon Communications and Hanley Wood. ABRY Partners' portfolio includes Cygnus Business Media. Pfingsten Publishing, which bought Advanstar's art tradeshows last year, is backed by BMO Nesbitt Burns. And Wicks Business Information, which sold a group of financial magazines and events to Dow Jones last year, is an affiliate of private-equity firm The Wicks Group of Companies.

But now numerous new players want into the market. "There's a ton of financial players," said Robert Crosland, managing director for AdMedia Partners.

Seaport Capital, a New York private-equity fund with more than $400 million under management, is one such recent arrival. Seaport made its first industry foray with the acquisition of Virgo Publishing, an 8-year-old Phoenix company that produces 16 magazines and seven tradeshows.

But competition is so pitched that some firms have given up on the space. Joel Milne, general partner with Boston-based Mt. Auburn Partners, said tradeshows' strong cash flow and scant capital needs caught his firm's eye. However, Mt. Auburn recently shifted its focus away from tradeshows and publishing after being unable to secure acquisitions.

"There are definitely properties out there, but there are a lot of people in buying mode right now," Milne said.

Tradeshows' improving metrics are increasing their acquisition cachet. "There's a lot of capital being attracted to the tradeshow sector. People perceive that it's gone through a challenging economic cycle" and has now stabilized, said Royce Yudkoff, president of ABRY Partners and chairman of Penton Media.

Those firms looking for tradeshows might be at a disadvantage to veterans like VSS, whose involvement stretches back to the 1996 acquisition of Canon Communications, a producer of medical-device tradeshows and publications.

VSS Managing Director Hal Greenberg said the industry familiarity helps. "We have a fairly keen eye for value in tradeshows. We have a pretty good knowledge of the operating metrics of a tradeshow. Therefore, if a show under-performs, we know what to do."

VS&A is the fifth-largest holder of large shows, behind Reed Exhibitions, VNU Expositions, George Little Management and Advanstar Communications, according to the 2004 Tradeshow Week 200. With four Hanley Wood Exhibitions shows and two Canon Communications shows on the TSW 200, VS&A commands a 3.5-percent market share of the 200 largest shows.

VSS has raised three funds worth a total of $1 billion since 1987, and has invested in or acquired 33 companies and completed 145 add-on acquisitions. The firm focuses on media and communications companies, including broadcasting, cable and publications, in addition to tradeshows.

Another private-equity player is ABRY Partners, which has $1.7 billion in capital under management and has made more than 450 investments and acquisitions since 1989. ABRY's fifth fund recently raised another $900 million. A controlling shareholder in Cygnus Business Media, ABRY also made a $50 million mezzanine investment in Penton Media.

Since ABRY and Cygnus CEO Paul Mackler's CommerceConnect Media bought Cygnus for $275 million four years ago, Cygnus has added 34 tradeshows, 19 magazines, 11 industry directories and eight Web sites.

ABRY Partner Peggy Koenig, a Cygnus board member, said the company continues to seek bolt-on acquisitions in key strategic areas. "I think the environment is quite positive," she said.

Although Koenig said it's a good sign that larger properties such as Thomson Media and Medical World Communications are being put on the block, Cygnus acquisitions are typically smaller, and require research and continual communication.

Eventually, private-equity companies will turn around and sell their portfolio companies. Indeed, the sale of Hanley Wood, which VSS has owned since 1999, has been long-rumored, with sales price speculation ranging from $500 million to nearly $1 billion.

Greenberg said both Hanley Wood and Canon are clearly quality properties. "We consider them both jewels in our portfolio. Whenever they go to market, whatever manner they go, they'll both command a premium price," he said.

But according to Greenberg, that investor payday is still a ways off. "At some point we have an obligation to liquidate, but I wouldn't say it's imminent," he said.

In the meantime, VSS will continue building its portfolio companies. Ascend Media has been the most active acquirer in the VSS stable lately. The company, backed also by JP Morgan Partners, bought SynerMed Communications in November, and Medical World Communications and Exhibitor Visibility World in December. Greenberg described the Medical World acquisition as "a transforming event," one that will give Ascend a strong focus on the medical and health care sector.

Hanley Wood, which serves the construction and building industry, secured two add-on acquisitions last year: StonExpo and the Natl. Roofing Contractors Assn.'s annual tradeshow.

Access Intelligence was created with the merger last March of PBI Media and VSS-owned companies Chemical Week and Chemical Engineering magazines. With the merger, Access Intelligence has expanded from defense, satellites and telecommunications to chemicals.

Reed Phillips, managing partner of media banker DeSilva & Phillips, predicts that the influx of financial investors will continue. "They have so much money in their funds that needs to be invested. You'll see a lot more of that this year," he said.