July/August 2005
Anatomy of an Association Acquisition

Case Study: AIIM sold its biggest asset to Advanstar to focus its resources on meeting member needs. Here’s how the two organizations successfully blended the AIIM and ON DEMAND shows to create an enterprise IT flagship event. 

By Dawn J. Grubb



Acquisitions can make even the most seasoned of executives — typically pros at wheeling and dealing — a bit squeamish. Reynolds Bish discovered that while serving as Chairman of the Board for the Association for Information and Image Management International (AIIM, www.aiim.org) in early 2000. The association’s show, AIIM Conference & Exposition, was floundering, and staffers struggled to find the capacity necessary to plan, support and maintain the event while simultaneously serving their members. Even though the show was AIIM’s cash cow, association leaders knew change was necessary and decided it was time to let go. So began their search for a buyer.

“As with all mergers and acquisitions, there’s always a point when you wake up in the middle of the night in a cold sweat, thinking, ‘Oh my God! Am I doing the right thing?’” says Bish, President and CEO of Captiva Software Corp.

In addition, the show was an integral part of AIIM’s persona and, from an outsider’s viewpoint, liquidating such a huge asset might seem foolhardy, says Bish. Only a handful of associations have sold their shows — and even those have had mixed success.

Bish’s concerns and those of his association counterparts proved unwarranted. AIIM found a formidable partner in Advanstar (www.advanstar.com), which shared a similar philosophy about the industry: with technology’s rapid advancement, buyers and sellers needed one event from which to gain educational insight, networking opportunities and business leads. The two organizations successfully blended their shows to create an enterprise IT flagship event: AIIM ON DEMAND. Here’s their story.

Making the decision
Deciding to sell part of AIIM’s rich legacy was the biggest challenge, says John Mancini, President of AIIM. The association began in 1943 as the National Microfilm Association and evolved with technology. AIIM launched its show 30 years ago, and it became an important part of the association, quadrupling in size from 1985 to 1994. The little hotel conference had become a full-fledged convention, generating a significant chunk of the association’s annual revenue — about 75 percent.

But in the late 1990s, AIIM was starting to get bypassed by major accounts and media because industry focus had turned more to the Internet. The show began to experience a revenue decline, and AIIM experienced an identity crisis. “We believed it would become more and more difficult for a small nonprofit organizer to compete with the larger for-profit event companies,” says Mancini. “We also were extremely financially dependent on a single event three days a year. Our job as an association is to represent the industry, not make a profit.”

Beginning in 2000, AIIM’s board of directors and Mancini talked about options and tried to envision the association’s future without the show. With 10 of AIIM’s 30-some member staff dedicated to supporting the event, manpower was a rare commodity and the capacity to produce the show just wasn’t there, says Bish. In April 2001, Mancini and the board concluded another organization would be better suited to running the show while AIIM staff focused on member education through publications, networking opportunities and other educational events and activities.

Bish and other board members tasked Mancini with identifying potential buyers. After talking with several parties, they found the ideal choice: Advanstar, which owned ON DEMAND, an output show for the digital imaging and publishing communities. Explains Mancini: “AIIM represented the world of electronic documentation. We always thought output/delivery was a potential way to grow our event.”

Indeed. Advanstar had already forged a strategic alliance with Europe’s version of AIIM, buying the DMS show in 2000. Mancini knew Kerry Gumas, then Vice President and General Manager of Advanstar’s Technical Group, and knew that Advanstar could offer a strong audience and elevated profile. ON DEMAND drew CEOs from such companies as Xerox, Eastman Kodak, FedEx Kinko’s and Comcast as keynote speakers. A meeting and casual conversation between Gumas and Mancini in Germany planted the seed.

“We already were growing to the AIIM exhibitor base and they to ours,” says Gumas. “Customers benefit from a strong audience, and attendees benefit from a single venue with end-to-end solutions. We could create a resource for the industry that wasn’t there. Co-location or acquisition made total sense.”

Completing the sale
Once AIIM’s board decided to sell, it took about nine months to finalize the transaction. Mancini became the driving force behind the sale and assumed day-to-day negotiations with help from the board’s executive committee, made up of Bish and another board member. Mancini kept everyone informed through e-mail updates and conference calls, and only called the board into session during a few key points along the way. ”The goal was to keep surprises as minimal as possible,” says Mancini. One of his biggest tasks: building the board’s confidence that they were acting with due diligence.

“Asking, ‘Should we really sell?’ is a natural question for a nonprofit, given how large some events have become,” Mancini says. “It’s a difficult decision to reach and you’re working with a business function outside your frame of reference. Mergers and acquisitions aren’t normal terrain for nonprofits.”

Enter Richard Mead, Managing Director for The Jordan Edmiston Group (www.jegi.com), who helped AIIM frame its show and identify strategic and financial buyers. “It was clear that they ought to sell and put cash in the bank and focus on their educational initiatives,” says Mead. “John really wanted a strategic partner to help grow the show and association. Had we brought a financial partner to the table who said ‘I have enough money and nothing else,’ it just wouldn’t have worked.”

Gumas agrees that Mead played a key role in the transaction’s success and did a great job communicating market fundamentals of the business and show. Negotiations went relatively smoothly from the start, Gumas says, because AIIM and Advanstar had complementary goals. “It didn’t get contentious because the show had a strong fit with our objective and the board’s objective,” says Gumas.

But he doles out the most praise for Mancini. “For an association to arrive at a consensus and make the decision had to involve considerable debate and discussion,” says Gumas. “And it was a very active board to deal with. From our perspective, John made it look like a smooth and easy process. He had a close relationship with the board, and they all were in sync.”

Still, even the smoothest transitions hit bumps — in this particular case, a nation’s tragedy.

Overcoming an obstacle
Timing could have been better for AIIM. The two parties were halfway through talks when the September 11 terrorist attacks occurred. The resulting economic fallout diminished the show’s value somewhat, and uncertainties about the future lurked behind everyone’s confident demeanor. For Gumas and Advanstar, bridging the gap on valuation proved difficult because the financial picture kept moving, with attendee and exhibitor cancellations. However, from both a buyer and a seller perspective, Mancini says the two needed mutual faith that the resulting trough in the event industry would be temporary. And besides, the venture had much going for it — namely, two parties intent on building a successful future together and creating the No. 1 event in the marketplace for the convergence of IT and content.

“The important thing with this transaction was the mutual trust Kerry and John had built,” says Mead. “They knew they could work together, and it proved invaluable.”

With the luxury of hindsight, Bish says he would have pushed harder to sell earlier had he had it to do all over again. Doing so could have freed the association staff to focus more on its constituents and probably netted a higher selling price pre-September 11 for the show — perhaps around 10 percent more. He also would have pushed to secure “tighter involvement” for AIIM — such as having a say in site selection and promotional activities. That said, Bish maintains that the entire process went “smoothly and fairly,” and he agrees with Gumas and Mancini that much credit is due to Mead and Jordan Edmiston.

“Whenever a transaction is so material to your business, it’s a good idea to involve your investment bank to think through the transition structure and valuation analyses and represent you during tough times,” says Bish. “In our situation, they added a value and earned what they were paid.”

Structuring the deal
With Mead’s help, Advanstar and AIIM worked out a five-year strategic arrangement — with a one-year noncompete tail — that consisted of a cash payment of 95 percent upon closing and a guaranteed ongoing key role for the association in the show. The remaining 5 percent is to be paid through a services and licensing contract, which includes overall AIIM endorsement of the event, services provided in support of the event, agreement to host association activities at the event and organization of educational conference content. As an incentive, the association receives a small percentage of overall revenues from the AIIM side of the event.

Maintaining a connection with the association was high on Advanstar’s priority list because it had proven itself in the marketplace and had a solid brand, Gumas says. And AIIM saw it as a winning solution, too. “We have a long history of developing educational content that’s really focused,” Mancini says. “Advanstar valued this and wanted the AIIM name attached to the show because we’re viewed as the ‘experts’ in the industry.”

Another winning solution: Both parties committed to continuity of people and location. Advanstar hired the association staffers involved in the event, including show manager Brian Randall, who became Group Show Director and General Manager of both the AIIM and ON DEMAND shows. (Randall recently left Advanstar.) Randall and the others enjoyed the luxury of staying in their office: AIIM sublet floor space to Advanstar, so people just had to walk 20 feet down the hall, Mancini says.

Eighteen months after the sale, AIIM and ON DEMAND, which was located in Milford, CT, officially co-located and integrated their two staffs in a centralized location in Newton, MA. AIIM’s largest exhibitors, most of whom serve as board members, applauded the integration strategy, knowing it best ensured members’ needs were met. “We made the decision early on that we wanted an integrated team,” Gumas says. “Separately led teams would have made for tough sledding.”

In addition, Advanstar hired Exhibit Surveys to survey exhibitors and attendees about the end-to-end show concept and received favorable responses. They presented the survey results to exhibitors of both shows to promote the co-location and build excitement for the new AIIM ON DEMAND, which debuted in April 2003.

Gauging the results
Each year since the sale has shown improved customer satisfaction and greater attendance numbers. In fact, last year’s numbers were up 16 percent from 2002. And the first year of co-location, Gumas says they “hit it out of the ballpark” based on their traffic density scores, which were determined by Exhibit Surveys research. In 2003, the traffic density index average for the industry was 2.3; AIIM ON DEMAND scored 3.2.

Today the show ranks as the sixth largest technology show in North America and the largest that specifically addresses enterprise technology, says Gumas. He attributes this success to the creation of a tightly focused event that filled a void left by the demise of broader horizontal shows like COMDEX and CeBit America.

“Now we’re certain of the marketing objective that we set out to achieve. We’re the No. 1 B2B IT event,” Gumas says. “Among our participating companies and audience, we have more high-profile companies attracted to the show. I think we’ve done a great job creating an event that makes total sense to attendees. Co-location reached the right target audience.”

AIIM has benefited, too. Mancini says the acquisition let them become a true industry association instead of just an event organizer. “We now focus on a broad range of educational and networking activities that, when coupled with a revitalized show, have made the entire industry stronger,” he says. Mancini and his team have spent the last few years building membership and utilizing the Web as an information portal to connect the industry, and hosting educational Webinars. In addition, AIIM has launched its Content Management Seminar Series Roadshow and Fundamentals of ECM certificate program, as well as sponsored books and publications.

“There are large associations that have the staff necessary to run shows and the chances of them selling their shows are slim. But there are smaller and medium-size associations that aren’t making the most of their events, and they’re becoming distractions. They ought to consider outsourcing,” says Mead. “Association presidents should look at their assets regularly and ask: Why should we continue to own the show?”

From an exhibitor’s standpoint, Bish says the show is much more professionally run and makes business easier in all respects — from picking a booth and exhibitor services to lead capture and processing. “It’s definitely a more successful show with more attendees, and it’s easier to exhibit. AIIM wasn’t bad before, running a show just wasn’t the association’s core competency,” he says. 

As for Advanstar, the company recently reviewed its portfolio and decided to sell off some assets. Gumas and a few partners raised equity to create Questex Media Group Inc. (www.questex.com) and bought five Advanstar divisions, including the one that houses AIIM ON DEMAND. But business as usual will continue, he says, noting that some 400 Advanstar staffers transitioned to Questex.

“AIIM is a very important part of the acquisition. It’s one of the largest shows in the group and the most attractive from a growth stand point,” says Gumas, who serves as Questex’s president and CEO. “I like to say that I loved the show so much I bought it.”