Investors Are Sweet on B-to-B

Advanstar Communications' spring sale of half of its business groups last month seemed a shocking pruning for an integrated media company with 77 magazines, 54 tradeshows, 40 conferences, 19 directories and seven electronic products. Since other business-to-business media empires have faltered in recent years, there was the temptation to view the sale of five entire divisions as a sign that the idea of building companies with fingers in many pies was starting to leave a tart aftertaste.

Advanstar CEO Joe Loggia said the divisions were sold for $185 million to Questex Media — headed by longtime Advanstar tradeshow executive Kerry Gumas — to create a more focused company. And with 48 publications, 32 tradeshows, 23 conferences, seven directories and two electronics products left, Advanstar will also be a much smaller one.

So will other companies that produce tradeshows, magazines and Web sites follow suit? Maybe, but not because they've soured on the idea of cross-selling their media properties.

Rather, in a market teeming with potential buyers, it's just a sweet time to clean out cluttered garages and attics. You'd be surprised at how many investors are dying to get their hands on grandma's old reliable tradeshow, that magazine that works only some of the time, the sparkly Web site that once gleamed with promise but now seems hopelessly shallow.

American Business Media CEO Gordon Hughes III, who has seen the fortunes of media companies rise and fall, predicts that more of his association's members will spin off parts of their businesses to take advantage of the current investor hunger for all things B-to-B. "They will trim their portfolios and small companies will buy the portfolio trimmings and everybody will take a breath and start all over again," he said.

Private-equity firm Veronis Suhler Stevenson is taking advantage of the current buyer interest in B-to-B to realize a return on its long-term investments in Canon Communications and Hanley Wood. And Primedia has hired Credit Suisse First Boston to explore the possible sale of its Business Information segment, which produces 70 publications, more than 100 Web sites, 25 events and 50 directories. The move was made after the company received expressions of interest from several qualified buyers. Of course, in these cases, the companies are substantially more than portfolio trimmings.

VNU Business Media last month sold four restaurant and food service magazines and associated conferences to U.K.-based Schofield Media. Even Penton Media is getting into the act, raising $5.2 million by selling off most of its German and U.K. operations.

Although buying and selling catches most of the attention, organic growth has its place too. Ziff Davis recently launched a magazine to go along with the DigitalLife consumer show kicked off last June. And Cygnus Business Media hopes to reach every fire station in the world through its Firehouse First marketing campaign for its Firehouse Magazine, Firehouse.com Web portal, Firehouse World Conference & Exposition and Firehouse Expo.

Cygnus President Paul Mackler remains as excited about diversified media as he was when he and ABRY Partners bought the company five years ago. "Being able to offer integrated media solutions is what customers want and what customers need and what customers are starting to demand," he said.

It matters less to him whether conditions are optimum for mergers and acquisitions. More important is how a disposition or acquisition fits with the company's strategic vision. More a buyer than a seller, Cygnus has made 15 acquisitions over the past four years, covering a total of 50 different properties.

Media bankers warn that 2005 is going to be a very busy year. Instead of sitting on the sidelines while bankruptcy experts pick up all the business, M&A specialists are back in the game. Jordan Edmiston Group Inc. tracked nine exhibition and conference deals in the first quarter, two more than in the year-ago quarter. And overall, according to JEGI, the 140 first-quarter media mergers represented a nearly 30-percent year-over-year increase.

B-to-B executives continue to hammer away at the idea that advertisers are interested in spreading the word through tradeshows, publications and online offerings. But at this point, that may not matter. Because even if advertising agencies aren't buying, potential investors surely are.