Questex Deal Defies a Wild Market Week

The week of Aug. 13 was a week the financial markets will not soon forget. Stock exchanges throughout the world rose and fell almost minute to minute. The largest mortgage company in the United States, Countrywide Financial, fought to stanch rumors it was threatened with bankruptcy, and credit markets all but dried up, leaving some major mergers and acquisitions — like those involving Hilton Hotels and Clear Channel — at least temporarily halted.

"I've talked to three bankers in the last day and a half who just say, 'We're closed for business,'" said Thomas Kemp, a managing director at Veronis Suhler Stevenson.

But Kerry Gumas, president and CEO of Questex Media Group, was not the least bit alarmed. In fact, on Thursday, Aug. 23, he announced his company had acquired Oxford Publishing, owner of what its president and CEO, Ed Meek, had labeled simply The Show: an annual collocation in Las Vegas of Nightclub & Bar/Beverage Retailer/Beverage & Food Convention & Trade Show, Intl. Restaurant Show-Las Vegas and Intl. Coffee and Tea Expo.

"We were very fortunate," Gumas said. "That's just a part of the natural rhythm of the economy."

Meek said, "As a matter of fact, I did make a call last week to see if there were any issues, but Questex has a very substantial war chest."

Oxford's shows and its Nightclub & Bar Magazine will fit in well with shows and magazines the larger company already has in the hospitality sector.

Gumas' good fortune in closing what is a major deal for Questex in a week when so many other deals were going sour is due in large part to the time it took to complete negotiations and due diligence. Gumas and Meek spent several months putting the deal together.

Plus, although terms were not disclosed (as is typical in the tradeshow industry), the value of the transaction likely did not approach that of other deals that were suddenly having trouble being funded.

"If it's under $100 million of debt, that's more available to you," Kemp said. "The M&A transactions that are running into trouble are those that are half a billion or more."

Gumas said, "We didn't have any of those issues. We had our financing secured early on."

In fact, many of the investment bankers involved in media properties in general, and tradeshows in particular, said they expected circumstances to eventually return to business as usual.

Kathleen Thomas, a managing director at Berkery Noyes & Co., said, "I expect that, given the strong fundamentals in the economy and the companies in our space, this is a correction from some of the very aggressive loans we have seen, and that credit will loosen up again in the very near term."

Nick Curci, president of Corporate Solutions, said, "The credit crunch will not affect the small market-size deals as they, in most cases, do not require substantial financing."

Not all was perfectly right with the world though. Adam Gross, vice president of marketing and communications for Jordan Edmiston Group Inc., which represents deals in the publishing and tradeshow markets, said nobody from his firm was available to speak with Tradeshow Week.

"For obvious reasons, I don't know that we're willing to share observations with the marketplace," Gross said.

On the other hand, Gumas and Meek were happy to share their story.

"This gets right to the core of what we're trying to build at Questex," Gumas said. Referring to Meek, he continued, "Ed is a quintessential entrepreneur. He's done an amazing job of building his company."

Meek said, "We had been pursued for acquisition for a number of years. Questex got our attention because of this entrepreneurial spirit."

At the same time that the acquisition was announced, Questex also announced the creation of what it is calling Intl. Hospitality Week in Las Vegas in February. Along with the three tradeshows acquired from Oxford, it will launch HotelWorld Feb. 24–27 at the Las Vegas Convention Center.

Questex's hotel and hospitality group already includes Incentive Travel Exchange, Luxury Travel Expo, Home-based Travel Agent Expo & Conference and the Intl. Hotel Investment Forum. It owns six business-to-business publications in the sector, including Hotel & Motel Management and Hotel Design.

Along with the shows that will become part of Intl. Hospitality Week, Oxford had already planned to launch Nightclub & Bar Expo Mexico June 18–19 in Mexico City.

Oxford will operate as a subsidiary of Questex, with Meek remaining president and CEO and Jennifer Robinson continuing as COO. It will still operate from its current office in Oxford, Miss.

Meek said he has a three-year contract to run Oxford for Questex, but has "no intention of retiring. I'll stay as long as they'll let me."

While Meek said he believed the timing of the deal, relative to the recent so-called credit crunch, would not have affected the value of the company he sold to Questex, others said it was likely sellers looking for buyers for their media properties would not see the same multiples for some time to come.

"It's clear that, at least as far as pricing and multiples are concerned, we've seen the peak," Kemp said. "We had too much exuberance."

"We closed Advanstar May 31 with a very attractive financing package," he said, referring to Veronis Suhler's $4 billion acquisition of Advanstar Communications. "We could not do that deal today."

Curci, referring to transactions the size of Advanstar, agreed, saying, "The valuations for these deals will also have to come down in order to get the required financing."