MARKET MOVES: Opportunism gives way to strategic growth in the exhibition industry

As the world mutters about the prospect of recovery in the face of one of the worst recessions in living memory, Pete Roythorne looks at how M&A activity has fared over the past 12 months and how it stands as a barometer of things to come.

When the economic crisis hit, it was clear that the turmoil in the banking sector would mean that large-debt funded acquisitions across the exhibitions industry would grind to a halt. Despite the doom and gloom, it soon became clear that although raising finance through the banks was more or less impossible, there was money available from other sources and a great appetite for internally financed acquisitions. 

Having said that, last year was certainly a year of two halves, with activity and interest in event mergers and acquisitions (M&A) coming back strongly in the second half after a quiet first six months.

“In the first half of 2009, the deals that completed were dominated by distressed situations where low values were the norm,” says Martin Wright, managing director of Media Mergers.

“Also a number of shows were sold in exchange for a share of future earnings rather than cash. In the second half, most of the larger players had completed their cost-cutting activities and started to focus on the future.

"We transacted a sale at the end of last year to Emap, and it’s a good example of how sales of good businesses with obvious growth potential can still be successful even in a recession of the severity we are currently witnessing. Indeed we are handling a number of sales at the moment which are likely to complete in the first half of 2010.”

Changing Places: A very big mover in an otherwise quiet year

 
DMG restructures
For Steve Monnington, who heads up Mayfield Media, activity for 2009 fell into three distinct categories.

“The first was exhibitions that needed to be sold as part of company reorganisations,” he explains. “DMG made the decision to exit from its consumer exhibitions business worldwide some time ago. The past six months have seen the sale of its UK consumer business, Outdoor Show, Ski Show and Vitality to Vos Media, and the sale of the Ideal Home Show to Media 10.”

Monnington believes entities like Vos Media, an investor group of exhibition entrepreneurs led by Keith Harris, are part of a wider trend in the UK that will be driving a lot of future M&A activity.

“There are several individuals who have decided that this is a good time to invest the proceeds from the sale of their own exhibition businesses, and over the next year we should see more of these entrepreneurs becoming financially involved with growing businesses that need both money and additional expertise,” he says.

Mayfield Media’s second major stream of business was from trade shows that are in buoyant sectors and which can, therefore, command normal market multiples.

“Among the trade shows deals this year, Clarion acquired 60% of Niche Events, which runs Counter Terrorism Expo, and Closer Still Media (CSM) acquired 80% of Principle Media, which runs Learning Technologies,” Monnington reports. “CSM also acquired Pioneer Global Media. Both purchasers were funded by private equity/venture capital.”

Turkey’s rising star
The final category of activity was overseas strategic deals.

“Turkey was not an obvious market for acquisitions, but we completed three transactions: ITE acquired a majority stake in EMITT, the travel and tourism show; UBM Asia formed a partnership with the Istanbul Jewellery show; and Bolognafiere co-branded the Beauty Eurasia show with its Cosmoprof brand,” Monnington continues. “The latter two agreements bring two new international players to the Turkish market, and the intention of both companies is to acquire a meaningful stake in the businesses.” 

Most acquisition activity in 2009 has been at the smaller end of the market – small transactions completed by small to medium-sized purchasers. Of the larger organisers, only UBM continued its acquisition activity, albeit at a lower level than 2008.

“Now that Informa has raised capital through its rights issue, we should see them back on the acquisition trail too,” adds Monnington. “Given the reasons surrounding the departure of Reed Elsevier’s chief executive, we shouldn’t expect much acquisition activity from Reed Exhibitions, but maybe EMAP will surprise us in 2010.”

Monnington believes we can expect to see continuing acquisition activity in Turkey as the companies that bought into the region seek to create some critical mass and other international organisers think about making the same strategic move.

“I wouldn’t be surprised if Brazil sees similar activity in 2010,” he adds. “Now that Dubai has shown itself to be founded on quicksand, expect Abu Dhabi to show more M&A activity as the key representative of the UAE.

Clarion call
“Over the next 12 months, we expect that Clarion will make some overseas acquisitions to consolidate their business in countries where they have yet to achieve critical mass. CSM should continue to unlock some of the less obvious entrepreneur-led businesses in the UK. Expect to see a number of other small and medium-sized organisers active as well.”

Despite the fact that the market is severely impacted by a lack of debt, which looks like persisting through the first half of 2010, Wright believes the outlook for M&A is brightening for 2010. “Corporates with cash will realise that organic growth is slow and will only find real growth via acquisitions,” he explains. “Most of them will undoubtedly be strategic or co-generic rather than opportunistic which characterises the peaks such as in 2007.”

While we’re unlikely to see a return to pre-2008 M&A activity across the sector for some time to come, Wright summarises the situation succinctly: "Those with cash will acquire and those without will have to wait on the banks to reopen their loan books again and that is just a matter of time."