Selling Shows: Associations Rarely Divest

By Margo McCall -- Tradeshow Week, 8/8/2005

Given the current merger frenzy, when it seems like just about everything is for sale, it's still fairly rare for an association tradeshow to hit the market.

The fact that few association shows change hands can be attributed to several factors. Although strategic players are frequently tempted by association shows, the private-equity firms currently scrambling to invest funds are more interested in large business-to-business companies, with interests across several forms of media, rather than a single show owned by an association.

Association board dynamics also play a part. Joel Novak, managing director of New York investment bank Berkery, Noyes & Co., said it can be difficult to get members of large volunteer boards to agree to sell what's typically the association's largest asset, let alone reach consensus on deal terms.

With annual conventions generating a hefty portion of association revenue, groups must also decide whether selling a show and investing the proceeds makes financial sense in a climate of historically low interest rates.

Selling a show is more likely when it meets an association's strategic objectives, such as dedicating more energy to member services or raising cash for a specific purpose. Associations are also more eager to divest when their show is on the skids.

"Where they have a specific set of circumstances that might favor a sale, you have a better shot," said Novak. "But even in the best of times, you don't see a lot of association shows on the market."

B-to-B giant Hanley Wood in recent years has added a number of association shows to its properties in the building and construction sector. Among them was last year's purchase of the Natl. Roofing Contractors Assn.'s annual tradeshow.

Bill Good, NRCA executive vice president, said for years the show hadn't even placed among members' top five priorities. Even so, he expected some resistance when the idea of selling the show was presented to the 119-year-old group's more than 80 board members.

"I expected to have some pushback on it. I especially expected to have that from some of the old guard and former presidents, and I never did," said Good. "You've got to have buy-in for it, or it will be a nightmare."

Good said board members were sent information on the potential sale, and directed to take an up-or-down vote by fax or e-mail and participate in a conference call. Only a few members opposed selling the show, which supplied one-fourth to one-third of the group's annual revenue.

"It was overwhelmingly positive. The deal made sense strategically, which was where the whole thing had its roots. And it made financial sense," Good said. "You don't do it just for money, and you don't do it strategically if the money doesn't work."

The sale turned out well for both sides. Hanley Wood was able to increase its portfolio of shows. And the association has been able to better focus on member needs.

"We truly are spending more of our time on things our members are telling us they want us to spend time on," said Good. "We are devoting more resources to government relations and regulatory compliance. We've reallocated resources and realigned staff."

Among Hanley Wood's other association acquisitions are: StonExpo, bought from the StoneExpo Federation and Marble Institute of America last October; Surfaces, acquired from the World Floor Covering Assn. in 2000; Intl. Pool & Spa Expo, purchased from the Natl. Pool & Spa Institute in 2001; and The Remodeling Show from the Natl. Assn. of Home Builders in 2001.

Hanley Wood typically signs long-term sponsorship and revenue-sharing agreements with the associations. "What we try to do is work out an arrangement. If the deal is structured right, they're just changing the way the revenue comes in," said Galen Poss, president of Hanley Wood Exhibitions.

In addition, the company isn't looking for bargain prices. "We pay them significant amounts of money for these assets. If you're going to sign a 25-year agreement with someone, you want to make sure they feel good about the deal. Our goal is not to try to buy things as cheap as we can buy them."

Poss said his team members have a lot of experience working with associations. After the sales, the associations still have a voice in the shows, but are freed from the task of producing them every year. "We don't make big decisions without bringing them into the discussion process. After all, they have connections to the industry," he said.

Added Good: "They're happy, and we're happy. The key to the success of it is the people who do deals together have to work together well, and we did."