Veronis Suhler Adds Advanstar to Stable

B-to-B firm changes private-equity hands in $1.4 billion transaction

By Michael Hart and Heidi Genoist -- Tradeshow Week, 4/9/2007

In December 2005, Advanstar Communications CEO Joe Loggia and his investors passed on all the offers around to sell the business-to-business media company, saying at the time it was doing just fine on its own.

By late last month, they had changed their minds.

On March 29, Veronis Suhler Stevenson announced it would lead a group in buying Advanstar for $1.4 billion. Other private-equity players in on the deal to purchase the B-to-B firm from DLJ Merchant Banking Partners III are Citigroup Private Equity and New York Life Capital Partners.

"It was all timing," Loggia said. "The company's doing really well."

Eric Van Ert, a managing director at Veronis Suhler, agreed. "This is a very different company than it was in the late '90s," he said. "Now you have some very focused high-quality assets around three verticals."

Roland DeSilva, managing partner of DeSilva + Phillips, an investment firm, agreed the deal made sense now in a way it might not have a little over a year ago.

"Here's the story," DeSilva said. "They sold some properties off, they made some acquisitions, they recapitalized the company, they've taken dividends out, paid down debt. All of that has to be figured into the return."

Today, Advanstar has a portfolio of 47 events along with almost 60 publications and directories and more than 95 electronic publications and Web sites, most focused on the fashion, life science and powersports industries.

"Their events business is particularly attractive," said Scott Troeller, a partner at Veronis Suhler. "It includes some of the largest and most effective tradeshows in the industry."

The jewel in the events crown is certainly MAGIC Marketplace, the fashion tradeshow whose two semi-annual events are both in the top 10 of the most recent Tradeshow Week 200. Its Dealernews Intl. Powersports Dealer Expo was No. 57 on the most recent TSW200.

Advanstar reported 2006 revenue of $323.7 million, a 12-percent increase over 2005 revenue of $288.9 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $94 million, up 17 percent from last year's $80 million.

In the quarter ending Dec. 31, 2006, revenue was $61.9 million, up 9 percent over $56.7 million in the year-ago quarter. Adjusted EBITDA was $8.4 million, up 18 percent from $7.2 million a year ago.

Loggia said, "Building on the strong growth platform we've established over the past two years, we achieved double-digit increases in both the top line and our adjusted EBITDA."

Loggia said he had been in serious discussions with Veronis Suhler since December, when the private equity firm first contacted him.

"This is a very good outcome for everybody," he said. "It's a very good one for our owners."

This will be the third time Advanstar has changed hands in just over a decade. The private-equity firm Hellman & Friedman bought the company from Goldman Sachs Group for $237 million in 1996. DLJ Merchant Banking Partners paid $900 million for it in 2000.

In 2005, Advanstar sold five divisions for $185 million to the newly formed Questex Media Group, backed by private-equity player Audax group and headed by onetime Advan- star technology executive Kerry Gumas.

"This was part of a change of strategy for the company," Loggia said. "Before, we would do any tradeshow or any trade magazine."

Now, he said, all of Advanstar's efforts are focused on one of the three verticals.

"We like industries that are young and where the dynamics are in place for change," Loggia said.

He said Advanstar would take advantage of the capital he expects to be available as a result of the sale to make acquisitions where and when they're appropriate.

"The way to get bigger is to be more focused on your customers," Loggia added. "We will be more aggressive on the acquisition front now."

That seems to be the direction Veronis Suhler is counting on.

"We're very acquisitive, and we look for management teams that are acquisitive," Van Ert said. "We help them do as many deals as the market will give them."

DeSilva said, "It was time for them (DLJ Merchant) to get more investors in there. VSS is an excellent owner for a B-to-B business, which they have a tremendous amount of experience handling."

Since the Questex spin-off, Advanstar has acquired three powersports events — Michigan Motorcycle Show, Motorama and Off Road Expo — and two fashion events — Pool and Project Tradeshow.

In 2005, the company undertook a corporate restructuring that shed 122 employees and closed five offices for what was estimated to be $9 million in annual savings. It now has approximately 1,000 employees in North America and Europe.

Credit Suisse advised Advanstar in the deal.