AES, Allen: the Saga

Year after management rift, exhibit services firm, ex-owner have moved on

By Heidi Genoist -- Tradeshow Week, 7/11/2005

It's been a little more than a year since tradeshow-industry veteran Charles W. Allen sold his interest in the company he founded, American Exhibition Services, to his cousin and now-company CEO Allen Brady. With a bitter separation and restructuring behind them, both sides say they are ready to focus on the future of their respective companies.

Allen started AES in Birmingham, Ala., in the late 1980s and, over the next decade and a half, grew the company into one of the largest and most reputable of its kind in the industry. Known for its Exhibitor Preview product — a circular newsstand where exhibitors pay to have their publications placed — AES works with show organizers to offer their exhibiting companies a variety of marketing and sponsorship opportunities. Today, these include everything from signs plastered on staircases to packets of promotional cards sent to qualified buyers.

In 2000, Allen entered into a deal with another Birmingham-based company, Vulcan Publications, to, among other things, launch a monthly exhibit marketing magazine called Expotential. The partnership would turn out to be ill-fated, as would the magazine, which was called off after only a few printings.

The economic downturn began just a few months after the AES-Vulcan partnership. Exhibit service suppliers were hit hard, as companies trimmed their tradeshow marketing programs. Marketing agencies — also in survival mode — increased their activity in the tradeshow world, formerly dominated by a handful of companies like AES.

Brady, whose background includes a stint at Alpharetta, Ga.-based metal fabrication company Metcam, said his cousin Allen brought him on board in 2002 because Vulcan "was not practicing business very ethically, and Charles needed some assistance in removing himself from that situation."

Vulcan Publications has had no apparent activity since Cygnus Business Media acquired its eight top construction and industrial titles in June 2002.

According to Brady, AES was "hemorrhaging cash after years of mismanagement."

About six months after he started, Brady brought on board a new CFO for AES, Pat Flood, who had been involved with Brady before in M&A and company restructuring projects.

Flood said that when he arrived, "The company was technically insolvent — bankrupt. It probably had revenue of about $5 million and was losing in excess of $2 million a year."

Allen, however, said the new executives' characterization of the situation is misleading. According to him, AES was doing well after he bought back his 50-percent interest in the company from Vulcan. "We always had a very strong market position," he noted.

Following the Vulcan fallout, Allen said, he returned his focus to a five-year strategic plan that was to conclude with an investment in AES by a strong capital partner. As that partner, he chose Brady.

Allen pointed out that he had run a profitable company for 15 years, and claimed those now in charge were already at AES when it began to have financial difficulties.

In any case, the Allen-Brady match was not a good one.

Flood said, "They had drastic philosophical differences on how the company should be managed."

Allen agreed. In February 2004, he elected to sell his majority interest in AES to Brady, he said, "as part of a dispute resolution settlement, the terms of which I accepted."

Allen said the main reason he sold his stake in the company was "the stifling effect of sharing equal voting rights" with a partner who held him to a "strict confidentiality clause" that prevented him from discussing management matters with outside parties. "It was preventing me from leading AES in what I truly believed to be the right direction," he said.

The separation, although difficult (both sides allude to lawsuits they are constrained from commenting on specifically), reportedly turned out well for the former partners.

Brady said he and Flood spent the last year focusing on eliminating unprofitable activities, straightening out contractual obligations and legal matters, and stabilizing the company's finances.

The company went from about 80 employees when Brady started, he said, to 60 today. In addition, he brought in-house the fulfillment and delivery of several services that AES had been subcontracting to outside vendors.

According to Flood, who would not give specific revenue figures for the closely held company, AES has over the last year increased its sales by 20 percent and lowered its operating costs by 25 percent — "and that's with 20 percent fewer sales people," he noted.

At least one person who's weathered the transition is happy. AES Executive Vice President Bliss Beasely, who handles industry relations and new business development, said she feels the company can now offer exhibitors better customer service by doing more in-house. "Our sponsorship division is really growing," she said.

Take, for instance, CONEXPO-CON/AGG. Show producer Assn. for Equipment Manufacturers, which has used AES' kiosks for years, decided to start a full-blown sponsorship program in 2005 and outsourced the whole thing to the company.

"They were outstanding," said Michelle MacKenzie, director of sales and operations for AEM's exhibitions division. "You give them direction, and they just take over."

MacKenzie said AEM will keep using AES for its sponsorship programs, which it plans to continue expanding.

Allen, meanwhile, said he spent the February-to-December period — when he was constrained by a noncompete clause in his separation agreement — reconnecting with family and friends he had neglected during the preceding tumultuous years.

In January, he launched the C.W. Allen Group, consisting of three divisions: a sponsorship arm (called SponsorSURE), speakers service (Eloquently Speaking) and sales training team (Sales Performance Technologies). The firm also offers strategic consulting through its Integrated Marketing Communications service.

Although he declined to give specific performance metrics, Allen said the 9-employee company is achieving its goals. The sponsorship division, he said, is working with large clients like the American Academy of Ophthalmology and SnowSports Industries America, but is meant to keep its number of shows at 25 or under.

The former partners are taking their new roles as potential competitors in stride. Allen pointed out that there are dozens of players in the show sponsorship game, and plenty of work to go around for all of them.

Said Brady, "We have employees that have been here since its inception. We're able to leverage that — especially with my being new to the business — and, through a culture change, turn it into something profitable."

Allen said in the future he would be more cautious about going into business with people whose philosophy is so different from his. "On the other hand, I'm where I wanted to be."