Market's Unscathed, For Now

Despite the negative impact of the subprime mortgage crisis on other sectors of the economy, the convention and exhibition industry's mergers and acquisitions market has, so far, remained relatively strong.

In 2007, the Jordan Edmiston Group Inc. tracked 66 deals valued at more than $1 billion, compared with 52 deals worth $875 million in 2006, a 20-percent increase.

“The average deal size was slightly smaller, but I wouldn't put a lot of weight into it,” said Adam Gross, JEGI's vice president of marketing. “The difference is very minor, and one transaction could completely turn the numbers around.”

In 2006, the biggest tradeshow-industry deal was Valcon Acquisition's $11.5 billion purchase of business-to-business giant VNU (now called The Nielsen Company). In 2007, nobody did a business-to-business media company deal anywhere near that size. The most substantial transaction was in April, when Veronis Suhler Stevenson led a group of private equity investors in the acquisition of Advanstar Communications for $1.4 billion.

Nick Curci, president of Corporate Solutions, said, “Clearly, the most significant deal for 2007 was the sale of Advanstar Communications to VSS. This was one of the very few large-cap deals last year that included 47 events and 60 magazines.”

The biggest tradeshow company deal was dmg world media's $155 million purchase of the remaining 51-percent stake it did not already have in George Little Management. Again, overall, the majority of similar transactions were much smaller.

Kathleen Thomas, managing director of Berkery Noyes, said she didn't expect mega-deals to come back until later this year, because of the current subprime mortgage crisis. “We may see foreign capital as the driver of the resurgence in that market,” she added. “Mid- to small-market deals have not slowed, and we are as busy as ever executing them.”

According to Curci, Corporate Solutions tracked 34 small, nine middle-market and three large-cap transactions last year. He agreed that larger deals would most likely be elusive until later in 2008. “This activity supports the underlying difficulties in the credit markets by limiting mid- and large- cap market size transactions,” he added. “With limited borrowing potential, buyers are forced to focus on smaller deals that are financed with internally generated cash flows, which is the reason for the increased number of smaller-sized transactions last year.”

In the fourth quarter of 2007, the largest deal tracked by Tradeshow Week was overseas: the United Kingdom's Guardian Media Group and New York-based private equity group Apax Partners bought the B-to-B publishing unit of Emap for $2.4 billion.

Several other B-to-B media companies looking to expand their foreign footprint also made deals in the fourth quarter. The United Arab Emirates, in particular, was a hot commodity. Reed Exhibitions Middle East snagged six shows from Trans Continental Fairs Management in Abu Dhabi and Dubai, as well as Doha, Qatar. The Tarsus Group, meanwhile, purchased the WR Kern Organization, the U.K.-based holding company of Fairs & Exhibitions, which has eight shows in Dubai.

“There's tremendous growth in the Middle East, so I would expect that the large exhibition companies will continue to invest in that area of the world, as well as in their traditional markets – U.S., Europe, etc.,” Gross said.

Back on U.S. soil, another significant acquisition in the fourth quarter involved WSA Global Holdings, owner of The WSA Show, a semiannual event for the shoe and accessories market, ranked Nos. 4 and 6 on the 2007 TSW 200. ENK Intl., which produces 22 shows annually, bought WSA, making The WSA Show its biggest property by far.

Just weeks later, at the beginning of this year, ENK scored $55 million in financing from GE Commercial Finance to back its growth.

Thomas said, “Both ENK and WSA are, separately, enormously attractive businesses with great track records, performance and market positioning. Why would a bank not want to finance these businesses?”