Entrepreneurs Working Without a Net

It was a heady time in 2005 for the U.S. tradeshow industry. Everyone, it seemed, wanted to make a deal – and had the money to do it, too. In just one six-week period that year, all of this happened:

• Advanstar Communications sold a sizable chunk of its portfolio for $185 million to Questex Media Group.

• Apprise Media purchased Canon Communications for $200 million from Veronis Suhler Stevenson.

• An investment group led by J.P. Morgan Partners bought Hanley Wood Exhibitions from VSS for $650 million.

“And we don't see any sign that '05 is the peak,” The Jordan, Edmiston Group, Inc. Managing Director Richard Mead told Tradeshow Week at the time.

It wasn't either. Before 2006 was over, VNU had become what is now Nielsen (to the tune of $11.5 billion) and Penton Media dissolved into Prism Business Media ($530 million). In a year-end wrap-up, Tradeshow Week counted 83 tradeshow industry-related deals in 2006.

Although the housing market had begun its collapse by April of last year, the buying spree still hadn't ended. VSS got back into the market in a big way, paying $1.14 billion for Advanstar Communications.

This year's biggest deal? Dmg world media was paid $53 million for its portfolio of 38 consumer home shows. The new company, Marketplace Events, backed by Stephens Capital Partners, a Little Rock, Ark.-based investment bank and made up of former dmg employees, no doubt was a good deal for everyone involved, but not quite as glamorous as those of the previous two years.

What with the collapse of Bear Sterns and Lehman Brothers, an incipient “credit crunch,” a quickly cobbled-together bank bailout and a cloud of economic indicators pointing every way but up, it's no surprise that face-to-face marketing's little corner of the economy would suffer along with the rest of the business world.

“All those deals that took place before were done under very favorable circumstances,” said Galen Poss, president of Hanley Wood Exhibitions. “No one is going to do anything like that now.”

Mike Iannelli, managing director of Lincoln Intl., said, “There's been real damage in the credit markets that will take time to heal.”

How much time?

“That's what nobody can predict,” said Lew Shomer, president of Shomex Productions and now chairman of a newly formed company called 5Net4 Productions.

That doesn't mean, however, that the relentless pressure to grow revenue, please investors and retain customers has ceased. Even if the traditional paths to acquisition and show launch might be blocked for the indefinite future, show managers of all sizes still are looking for ways to grow both the top and bottom lines.

Crazy notion No. 1: pay cash.

“It's a very different idea,” Shomer said.

But, it's what he and veteran show organizer David Korse did in August when they formed 5Net4 and acquired Abilities Expo from Questex. Granted, it's not the kind of multimillion-dollar deal show managers similar to Shomer and Korse might have been looking at a few years ago, but, to them, it made sense.

First, there's the autonomy that comes when investors or bankers are not involved.

“This way,” Shomer said, “David and I sit down, we have a cup of coffee and we make a decision.”

Right now, there are three editions in Minneapolis, New York and Anaheim of the show that focuses on people with disabilities, their caretakers and those who administer Americans With Disabilities Act programs. Shomer said it is likely one of those cities will be dropped, but more shows in other cities will be launched.

Of course, the fact that Shomer and Korse used their own money isn't the only thing Abilities Expo has going for it. Some 18 percent of the American population could be considered disabled in some way, and, while old age is not a disability, a lot of the products and services seniors need can be found at an Abilities Expo.

In other words, the show is about as recession-proof as you can get.

“We see this as a huge growth market,” Shomer said. “It had nothing to do with the economy.”

Joel Davis, president and CEO of JDEvents, has more or less the same strategy, albeit a bigger portfolio that he's spent the past few years growing.

“We don't have any debt, and we're not looking to take on any,” Davis said. “We've been able to pay for our acquisitions through our existing cash flow.”

His most recent acquisition, School Building Expo, from Eaton Hall Exhibitions, came that way. Plus, it was quite similar to another show JDEvents already owns, Healthcare Facilities Symposium & Expo.

“It's a market that makes perfect sense for us,” Davis said, “a lot of the same exhibitors, a lot of the same attendees.”

He added that he expects to find other events that might be “undervalued and under stress” – particularly if the economic conditions don't change any time soon.

“We consider ourselves an incubator,” Davis said. “We launch and acquire as opportunistically as possible with the expectation we'll be selling the event at some point.”

So, he added, he'll be doing some research during the next year or two.

“We first started in 2002 or '03 when the market was really soft,” Davis said. “I'm kind of anticipating those opportunities this time.”

Likewise with Doug Miller, president of Urban Expositions. The Atlanta-based show management company has 18 shows in its portfolio, two of which are launches scheduled next year and a third, which is a recent acquisition – apparently paying little mind to the economy.

“We tend to not read the newspaper or listen to the news,” Miller said.

In fact, he recently hired a staff member who will devote his time to ferreting out new business opportunities.

“We're putting something together for an industry I can't mention right now,” he said.

Just as with Shomer, it will likely be something that he can get into without a large infusion of money from an outside source, Miller said.

The shows Urban Expositions will launch next year are the Natl. Country & Crafts Show in Oaks, Pa., and the Fort Lauderdale (Fla.) Gift Show. While it recently acquired the Boston Gift Show from dmg world media, more typically, Miller said, “We look for the smaller mom-and-pop shows.”

Another crazy idea: Do something to create value that doesn't necessarily call for a financial investment.

“One thing we're doing is collocating some events so they can perform better,” Poss said. “That gives you some leverage and gives your customers more bang for their buck.”

Next October, as an example, Hanley Wood will collocate DeckExpo, which it acquired two years ago, with the Remodeling Show at the Indiana Convention Center & Lucas Oil Stadium in Indianapolis.

“These two events are a natural fit,” said Amy Allen, the Hanley Wood associate show director for both.

Other organizers are getting into this act, too.

In October, 1105 Media announced it would collocate its FOSE government IT show with its GovSec homeland security event and U.S. Law, two shows it already had moved in together, March 10-12 at the Walter E. Washington Convention Center in Washington, D.C. At the same time, the company also announced it would not hold its Ready! Conference & Exhibition event next year, instead trying to incorporate its exhibitors into either GovSec or U.S. Law.

“These areas are starting to converge,” said Christina Condos, 1105 Government Information Group vice president of events, “so our attendees will be interested in both.”

On the international scene, Messe Hamburg announced it would combine its Nord Elektro and SHK Hamburg into Get Nord Nov. 19-21 in Hamburg, Germany. Messe Stuttgart just acquired Trade Fair Genoa's amusement park-related Technofolies; moved it immediately from its Genoa, Italy, home to Stuttgart, Germany; combined it with its own Interschau; and decided to call the new show Amusement Expo when it is held again in October.

In another twist, Hanley Wood created an alliance with Italian venue and show organizer Veronafiere, driving exhibitors from its Verona, Italy-based Marmomacc to Hanley Wood's StonExpo, which traditionally has showcased machinery and stone-related products, but not a lot of stone.

When held in mid-October at Las Vegas' Mandalay Bay Resort & Casino, the newly named StonExpo/Marmomacc Americas spanned 124,000 net square feet and drew a total attendance of 7,399 and 333 exhibiting companies.

“Two years ago, we probably wouldn't have looked at something like this,” Poss said, “but these times require looking at things differently.”

Poss also wondered if the industry might see some mergers of large show management firms next year that did not necessarily involve large sums of money changing hands.

“I think you'll see some of these players that have big bets down looking for ways to take the cost out,” he added. “With those costs coming out, you have the same benefit of adding to the top line.”

Regardless of what kind of creative way show managers could think of to get through whatever the future might bring, most had some version of simply saying they would wait things out.

“We'll slog our way through this,” Poss said. “It'll just take some time.”

Davis added, “It's hard to predict what things are going to be like, but I do think it's going to be challenging.”