M&A Deals Still Slow, Right Now

Everyone knows the bad news about the tradeshow mergers and acquisitions market: The downturn in the economy has all but put a halt to what was once a white-hot deal pace.

Beyond a few small- to mid-market transactions, the go-go days of billion-dollar deals are a thing of the past, at least for now – but perhaps not for long.

According to Ken Collins, partner at media investment banking firm desilva+phillips, once the credit markets recover and private equity and other buyers start getting into the game again, the sky will be the limit.

“It continues to be a wonderful business,” Collins said. While other sectors might be taking a hit because of the struggling economy, he added, the tradeshow industry is alive and well, presenting “excellent cash-flow opportunities” for those interested in investing in it.

A white paper titled “The Events Industry: The Opportunity for Sustained Growth,” released at a same-named conference Sept. 4 at The Paley Center for Media in New York City by desilva+phillips in conjunction with consulting firm AMR Intl., found, among other things, that “acquisition multiples will remain strong, albeit at slightly lower levels than in 2007. The pace of the acquisition activity will nonetheless be maintained – driven by the sector's attractive overall growth rate and the level of change in the markets served by tradeshow organizers.”

There were other findings in the white paper:

• Tradeshow companies will continue to build their portfolios, and publishing-oriented groups will continue to acquire events to offset declines in print advertising revenue.
• Private equity firms will remain active in the sector and continue to look for pure exhibition businesses, but otherwise lean toward acquiring business-to-business assets.
• The fragmented nature of the industry will ensure a steady flow of acquisition opportunities.
• The economic downturn and squeeze on marketing budgets will affect undefined and poorly run events, possibly leading to their failure or sale.
• Launches will continue in new and niche markets.
• Organizers will seek to optimize their revenue models; they will strive to increase their engagement with attendees; and the Internet will continue to grow in importance and extend beyond marketing and registration.

According to Sam Schulman, managing director of desilva+phillips, the conference was attended by “75 senior executives from media companies and private equity sponsors, who are the most active owners and acquirers of events businesses.”

The conference consisted of a panel dicussion on the white paper and included panelists Richard Kerr, head of group development, United Business Media; Don Pazour, president and CEO, Access Intelligence; Mike Schneider, CEO, Affinity Group; Jeff Stevenson, co-CEO and managing partner, Veronis Suhler Stevenson; and Neal Vitale, president and CEO, 1105 Media.

According to the white paper, the global tradeshow industry generated approximately $100 billion in total revenue last year, growing at an average annual rate of 6.2 percent since 2003.

In other words, it's a good business to get into – if you can. Beyond the problems in the larger economy, the most serious issue is the dearth of exhibition properties in the marketplace.

According to Collins, the biggest property that currently has a “for sale” sign on it is Cygnus Business Media. He said he was limited in what he could say about the property since desilva+phillips is involved in marketing the company, but, he added, there wasn't another company of that size with events in its portfolio that was available.

“It's the way the business goes,” Collins said. “There are still small (deals), still big, then ones in the middle. It's a tough market because associations own so many shows, and they're not giving them up.”

Waiting on the sidelines are any number of private equity players who need banks to loosen up on their lending again.

According to the white paper, some of the significant private equity players in the tradeshow industry include ABRY Partners, CCMP Capital Advisors, Veronis Suhler Stevenson and Audax Group.

With the U.S. economy in the doldrums, the white paper found opportunities for growth in overseas markets such as the Middle East, whose trade industry is forecast to grow 20 percent by 2011, and China, forecasted to grow 15.1 percent in the same time period. Other countries whose tradeshow industries are poised for growth by 2011 are India, 13.5 percent; Russia, 10.7 percent; and Brazil, 8.3 percent.

According to the white paper, “in international markets where the events markets remain relatively immature,” all projections are for very strong growth.