Three non-profit associations acquire a for-profit trade show

By Martha Collins

Fun is serious business. Just ask the three amusement industry associations that banded together last year to buy the Fun Expo from Reed Exhibition Cos. They’re betting that three nonprofit trade associations — two of which already own their own association shows — can cooperate to use their industry expertise and connections to grow a for-profit show more successfully than an independent show organizer could. Even in an economy that’s seeing a trend toward non-traditional partnerships, it’s an unprecedented arrangement.

During an intense eight-month negotiating process that began barely a month after the 1999 Fun Expo, the associations hammered out an agreement that covers every potential situation they could think of that might complicate an arrangement between organizations representing three different areas of the industry, each with its own agenda. They developed the three-way partnership deal, created a separate business entity to run the show, hired a show management firm to sell and manage it, and signed the sales agreement with Reed barely three months before the 2000 event. 

In June 2000, the International Association for the Leisure and Entertainment Industry (IALEI), the American Amusement Machine Association (AAMA) and the Amusement & Music Operators Association (AMOA) purchased Fun Expo, a trade show for the family and location-based entertainment industry, from Norwalk, CT-based Reed. (The purchase price was not disclosed.) The three associations have formed a joint-venture partnership called LETS, the Leisure & Entertainment Trade Shows, with executives from each group on the board of directors. 

Show History
A group of partners led by Bailey Beeken launched the Fun Expo in 1991 to provide owners and operators of small- to mid-sized family and location-based entertainment centers with the products, services and training they need to run their operations. The four-day show, held once a year in late September or early October, includes a three-day exhibition and more than 60 educational and networking sessions.

“We started with 225 booths and 1,500 attendees in 1991, with a little better than two booths per company. By 1998, there were 889 booths and 9,000 attendees,” says Beeken. “We were a small and entrepreneurial company and felt we had grown it as much as we could. For the next move, it made sense to sell because we felt a bigger company could make more of it than we had."

In 1998, Reed bought the Fun Expo and Beeken, who now serves as Director of Trade Shows and Conferences for NY-based Adams Business Media, went to Reed temporarily to work on the transition. 

The Players
Hillsborough, NH-based IALEI, which currently has 600 members, has grown in tandem with the Fun Expo. Originally named the International Association of Family Entertainment Centers (IAFEC), it was founded by industry leaders in 1993, after Fun Expo’s annual survey indicated that attendees wanted such an organization. From its inception, IAFEC has sponsored the Fun Expo and, when the show was sold in 1998, the association signed a 10-year sponsorship agreement with Reed, which included a “right of first refusal” should Reed decide to sell the show. The association name was changed to IALEI in 2000.

Chicago-based AAMA— an international nonprofit trade organization representing the manufacturers, distributors and suppliers of the coin-operated amusement industry — was founded in 1979 and currently has 175 members. AAMA has its own trade show every spring. Amusement Showcase International (ASI) features the latest in coin-operated amusement equipment. “Our members also participate in Fun Expo as both exhibitors and attendees,” says Mike Rudowicz, AAMA President.

AMOA, which was founded in 1948, is located in Chicago in the same building as AAMA. Its 1,250 members are the operators who sell and service jukeboxes, video games and pool tables. AMOA International is an annual fall show for operators, distributors and manufacturers of coin-activated equipment. “There is some overlap between the three associations in terms of their roles in the industry,” says Jack Kelleher, AMOA Executive Vice President.

The Market
With the industry in the doldrums in 1998, thanks to increased competition for consumers’ entertainment dollars, exhibitors had been calling for consolidation of trade shows. So in 1999, when the Fun Expo and AMOA International had moved their shows within a week of one another, they decided to try a co-location. 

The co-location was a successfor AMOA, which decided to do it again in 2000. “We had some exhibitors who increased their space because of the affiliation with Fun Expo,” says Kelleher.

The entertainment industry segment that the Fun Expo focused on though was slowing and the 1999 show was smaller than the previous year, so Reed approached AAMA and AMOA about buying the Fun Expo. 

“I suggested bringing IALEI into it,” says Frank Seninsky, who at the time of the negotiations was President of AMOA. “With three partners, you have to work very hard to make sure no decision is made without everyone having a chance to have input. We spent a lot of time trying to predict what could happen and understanding one anothers’ associations,” he says.

Representatives from each association took part in the negotiations. One from each took the lead in hammering out the details — Seninsky for AMOA; Frank Gumma Jr., a member of AAMA’s board; and Harold Skripsky, who at the time was immediate past President of IALEI and is currently Chairman of LETS.

“Because of our sponsorship agreement with Reed, IALEI had the first right of refusal if the show was to be sold. So we took the lead in the negotiations with Reed because we didn’t want to sacrifice that right,” says Skripsky.

A major goal for IALEI was to have its own trade show. As a newer association, it had more modest financial reserves than the two more established associations, so the partnership would enable it to purchase a share of the show, then use its share of the profits to eventually buy out its partners. (This is a provision in the agreement.) Partly because of this, it was agreed that IALEI would buy a 50 percent share of the Fun Expo, and AMOA and AAMA would each by 25 percent.

The Negotiations 
“Obviously, when you do a three-way partnership, it becomes very complicated because there are different cultures for the three different associations. We have 15 board members and an executive committee and are more traditional and structured,” says AAMA’s Rudowicz. 

AMOA’s Kelleher agrees: “Our association is more than 50 years old. We have a large board. We’re steeped in tradition. On IALEI’s side, it’s entrepreneurial, it’s a smaller board. I think there was some frustration when AAMA and AMOA would say, ‘We need to talk to our leadership and get the buy in from our board.’ And IALEI would say, ‘Well we can make these decisions because we have been designated to do so.’ But that’s just not the way we at AMOA and AAMA do things.” 

One major hurdle that seriously slowed the negotiations is IALEI’s goal to move the Fun Expo to the spring. “There is some disagreement on this because we have huge competition in the fall with the IAPPA Show (International Association of Amusement Parks and Attractions), and there are many people whothink we would be better having our show in the spring. Some exhibitors like fall; some like the spring. AMOA values the co-location with its fall show. So it’s not an easy choice to move to spring. There’s been a lot of discussion and there will probably be some interim steps to test that, but it won’t be a sudden move,” says Carole Sjolander, IALEI Executive Director.

“It appears that the Fun Expo will have a pavilion inside the ASI 2001 show in March. And that’s going to test the waters a bit,” says Skripsky. “But there are some problems moving the Fun Expo to the spring — primarily lead times for some of our outdoor exhibitors. So there is a value in maybe keeping AMOA International in the fall and maybe having a Fun Expo pavilion in the fall show if we move to the spring,” he says.

“There was a certain amount of concern over turf when we were negotiating. That we might lose some exhibitors to Fun Expo or that Fun Expo might lose some exhibitors to AMOA and then each would get only a portion of the revenue they previously received from those exhibitors,” explains Kelleher. “We came up with some ways to hedge that by tracking our exhibitor lists. If an exhibitor had a history with our show, but not with the Fun Expo, and then jumped ship, or vice versa, then the other show would be compensated for that.”

Some issues were considered non-negotiable by one or more of the associations, and these became special provisions in the partnership agreement. Among them:

• A safety net — If the show performs poorly, there are benchmarks whereby, after a loss of a specified amount, an association can opt out of the agreement. “It’s not an easy out, but it is an out,” says Skripsky.

• A one-time special payment to 
IALEI — As remuneration for the time and effort IALEI invested in establishing the partnership and negotiating with Reed, it received a one-time special payment from the profits of the 2000 Fun Expo.

• Unanimous vote requirement — Most issues that come before the LETS board require a vote of 75 percent to pass. Some critical decisions, however, require a 100 percent vote, including the budget, moving the Fun Expo to the spring, adding partners to LETS, changing show management and selling the show.

The Agreement
Only association board members or past presidents can serve on the eight-member LETS board, which must have four from IALEI and two each from AMOA and AAMA. Of the four offices, IALEI will always gets the chairmanship and one other, and AAMA and AMOA each get one. Additionally, each association Executive Director is a nonvoting member of the LETS Board.

“When there are three parties involved, it’s important to have a specific means of making decisions because everything affects each association. The voting procedure is a good example. Each association’s board representatives must vote as a block. Even though there are eight people on the LETS board, there are only four votes — one each for AMOA and AAMA and two for IALEI,” says Seninsky.

“If you want to bring something to be voted upon, you write a white paper on it, including the pros and the cons. The white paper is submitted to the board chairman, who has a duty to get feedback and present the feedback to everyone before the meeting. So everyone is familiar with the original proposal and the feedback before discussion and voting. The process runs very smoothly. It just takes time. The board has conference calls about every two weeks and also meets at all major industry shows.” 

Conflict of interest is another potentially sensitive issue. “Because two associations’ own trade shows that theoretically compete with the Fun Expo, we wanted to ensure that they wouldn’t go out and co-locate or merge with other associations that would actually compete with Fun Expo. We had to protect Fun Expo, so the agreement outlines, with examples, what would be the possibilities and what would be allowed and not allowed,” saysSkripsky.

The Future
Choosing a show management firm was easy. Chicago-based William T. Glasgow Inc. has been handling the AAMA spring show for more than a decade and took over the AMOA show in 1999. 

For the 2000 Fun Expo, Glasgow had to hit the ground running. “The lateness of the purchase and turnover hurt the exhibitor and attendee results this year since we were so far behind the curve once we received the show. Just getting the Web site switched from Reed to Glasgow took weeks. There was a lot of frustration on exhibitors’ part and on our part because of all this. Exhibit sales suffered. This will not happen in 2001, so exhibit sales should go up,” says Skripsky, who notes that there are no plans to raise either the exhibit costs or attendee registration fees. 

For the immediate future the goal of the three associations is to grow the Fun Expo by adding additional categories of exhibitors and possibly additional co-locations.

For the long term, the goals are less certain. The partnership agreement is for 10 years, and in that time any one of several scenarios may come into play, according to association leaders. The most likely seems to be that IALEI will buy its partners’ shares in Fun Expo. It’s also possible that the show will move to the spring and co-locate with AAMA’s ASI show. 

However the show dates and co-locations play out, the associations are convinced they will be more successful than Reed at growing the show, in part because any profits can be returned to the industry through member benefits and in response to industry needs. 

“I think that there’s no substitute for being actively engaged in an industry,” says Kelleher. “IALEI, AMOA and AAMA have a distinct advantage in dealing with both exhibitors and attendees. We have a vested interest in our trade shows. We can work closely with exhibitors, and our focus is on our marketplace.” 

Martha Collins, a freelance writer and editor based in Austin, TX, is a frequent EXPO contributor. She is Co-Managing Editor of the Convention Industry Council Manual 7th Edition, published in December 2000.