Mergers and Acquisitions: All Win When Nonprofits Sell

More often than not, an association show is a valuable investment for any for-profit company to make — if it can find one.

Kathleen Thomas, managing director of Berkery Noyes, listed a number of reasons they were attractive: "They are typically leaders in their industry. They tend to command a position of authority and importance in the vertical market they serve. There are also best practices that a for-profit can employ that, for many reasons (political, cultural, etc.), an association may not."

The shows might be a good buy, but it's rare that one has a for sale sign up.

A 2006 Jordan, Edmiston Group Inc. M&A Outlook report on the exhibition industry listed just three association tradeshow transactions, a mere 5.8 percent of the total. The World Shoe Assn. transferred ownership of The WSA Show to WSA Global Holdings; Australasian Gaming Machine Manufacturers Assn. sold its Asian Gaming Expo to Reed Exhibitions' Global Gaming Expo; and, in a reversal, Reed Exhibitions sold seven Canadian industrial and manufacturing exhibitions to an association, the Society of Manufacturing Engineers.

Richard Mead, JEGI managing director, said association shows are rarely up for sale because they "become an integral part of the association organization and a major revenue stream. Plus, the perception on the part of the associations is that owning a show means that an association can control what happens to the show for the benefit of its members."

Thomas added, "Often, associations don't understand the benefits of selling. Structuring the right deal can both give the association economic security and risk mitigation, as well as continue to provide its membership and constituency with a vital member service. It does not occur to an association management to consider and evaluate its strategic options with regard to partnership or sales."

Sometimes it takes just the right buyer to convince an association that selling its show is the best thing for both sides. One company that's figured out that approach is Hanley Wood, which since 2000 has bought six shows from associations and one from an independent organizer partnered with an association.

"We're very vertically focused on building and construction, and most of the quality events in this sector are owned by trade associations," said Galen Poss, the company's president.

Hanley Wood acquired several of its biggest shows from associations:

• Intl. Pool & Spa Expo from the Natl. Pool and Spa Institute
• Remodeling Show from the Natl. Assn. of Homebuilders
• StonExpo from the Marble Institute of America
• Surfaces from the World Floor Covering Assn.

Most of the acquisitions also involved accompanying magazines or complemented Hanley Wood's existing titles. "Normally, we don't look at it as buying tradeshows, but market segments," Poss said.

Buying an association show is an entirely different process from a transaction between for-profit companies. "In order for an association to sell a tradeshow, it requires a great deal of work and often board approval," Poss said. "Buying an association show is usually a six- to eight-month process." In contrast, he added, "if you run hard you could close on an independent show in 30 days."

Once a show is sold, he said, Hanley Wood signs a long-term sponsorship agreement with the association. Such agreements vary in length from 25 to 45 years. "We stay married to the association," he added.

Beyond the sponsorships, associations also work in partnership with Hanley Wood on the educational sessions at the shows. "It's important to keep a tight relationship and work together on the curriculum," Poss said. "We form advisory councils based on both groups."

The two are also tied to one another through the show financially, he added. "There is usually some type of ongoing compensation based on show performance or an agreed-upon amount that has an inflation component."

Hanley Wood has grown every association show it has acquired, according to Poss. Based on that success, the company has every intention of buying even more of them in the future.

"Our success is tied to the association's success," Poss said. "It's been a win-win in every case."

In 2002, Cygnus Business Media scoped out what was available in the tradeshow market and snagged the Solid Surface Intl. Exhibition from the Intl. Solid Surface Fabricators Assn.

The following year, it scored again with AS³, the Aviation and Suppliers Super Show, which it bought from the Natl. Air Transportation Assn. and the Professional Aviation Maintenance Assn.

"Both of them were a great fit with respect to vertical markets we were in," said Julie Thompson, senior vice president and interim head of Cygnus. The surface show, renamed in 2006 the Surface Fabrication & Design Expo, became a part of the company's building and home products portfolio. The aviation show, now simply called AS³, clicked with the company's existing aviation and transportation market.

Like Hanley Wood, Cygnus maintains relationships with the associations it acquires shows from and gives them financial compensation, according to Thompson. "They have a voice in the direction," she added.

Thompson, too, said acquiring an association show and then partnering with the association itself was a fortunate situation. "When you buy an association show, you're able to utilize the credibility of the association for future brand recognition. You have an opportunity to market to the membership base and be a part of the educational process," she said.

Dmg world media recently completed the divestiture of a number of home and garden shows in the United States, but decided to hang onto the Central Florida Home & Garden Show, which it bought in 2003 from the Home Builders Assn. of Metro Orlando.

"It has been very successful for us," said Mark White, vice president of dmg's Home Interest North America.

Dmg bought the show around the same time Orlando's Orange Country Convention Center expanded. "We had the opportunity to buy the spring show (from the association) and launch one in the fall as well," White said.

Unlike Hanley Wood and Cygnus, dmg did not partner with the Home Builders Assn. on the show, although, according to White, the association's membership supports the show as much as it did before.

White was pleased the show, one of the fastest-growing in dng's home and garden portfolio, was even for sale. "Certainly in the home show business it is rare. It's the first time I have ever heard of it," he said.