May 2007
From the editor: Changing of the guard

It’s hard to believe that 15 years ago most for-profit shows in our industry were privately owned. Today, it’s a stark contrast. In fact, nearly half of the 138 M&A business-to-business communications transactions completed in the last 18 months were acquired by private equity (PE) funds or PE-owned companies, according to the Outlook & Strategies report published last month by Berkery, Noyes & Co. LLC, a New York City-based investment banking firm (See EXPOweb News, April 12, 2007). Traditional, non-PE-backed strategic buyers acquired the other half. The seemingly insatiable appetite for B2B communications companies among the swelling ranks of PE firms is driving double-digit multiples in M&A transactions.

For example, in late March, Advanstar Holdings Corp., the holding company for Advanstar Communications Inc., entered into an agreement to be acquired by an investment group led by Veronis Suhler Stevenson (VSS), a PE and structured capital fund management company, for approximately $1.142 billion in cash — or 12 times its estimated earnings before interest and taxes, plus depreciation and amortization (EBITDA) of $94 million in 2006.

Access Intelligence, Canon Communications, Hanley Wood and Ascend Media (EXPO magazine’s parent company) are also part of a portfolio of companies funded by VSS. Other B2B companies with a strong trade show portfolio backed by PE funds or companies include the recent merger of Prism and Penton (now known as Penton Media), Cygnus Business Media, M/C Communications, 1105 Media and Apprise Media.

So how has PE ownership changed the trade show industry? It has brought a level of financial sophistication to the exhibition industry that has helped to accelerate growth, meaning we’re also more accountable for hitting our numbers and our bottom line than ever before. PE owners generally have more aggressive acquisition plans in order to scale up quickly to compete in the marketplace, so there are more bigger players with event portfolios now than smaller entrepreneurial companies with a handful of shows.

PE-backed companies generally don’t invest in show launches or other ventures that might not turn a profit right away. That’s not how their business model works; they typically sell or flip a company within three to seven years. So there’s plenty of room for entrepreneurs looking to launch new shows — and eventually sell them.

There’s no doubt the boom in PE investment presents an unprecedented opportunity for private sellers today. If you’re looking to sell your business, there’s a wealth of brokers for you to choose from who now understand our business. And most investment bankers, including Berkery Noyes, are forecasting high M&A transaction volume in 2007, strong multiples and aggressive buyers fueled by a continued rising tide of PE investment.

Danica Tormohlen, Editor
dtormohlen@ascendmedia.com