The answer is pretty simple: It depends solelyupon the perceived value, or cash flow, the shows will bring the buyer in thefuture — whether they’ve been sold 50 times or never.

Paul Mackler and his private equity partner,Boston-based ABRY Partners LLC, are certainly betting that their $275 millionacquisition of Cygnus Business
Media — whose core group of shows has been sold three times since March 1997— will not only bring them cash flow, but also give them a head start in
building an integrated B2B media powerhouse.

The Cygnus deal — whose purchase price is a
multiple of nearly three times projected revenue — included 17 shows andconferences, 48 magazines, 17 custom publications and 60 Web sites.

“We didn’t want to build our company onebrick at a time,” says Mackler, CEO of CommerceConnect Media, a company heformed in October 1999 after resigning
as President of Reed Exhibition Cos. North America in May 1999. “We wanted totake a strong company and move forward in achieving our vision, and that’s toleverage each medium to bring more value to our customers.”

Undoubtedly, CommerceConnect’s efforts willbe closely watched in exhibition and publishing circles, as everyone fromindependents to larger competitors waits to see just how well this seasoned —but youthful — exhibition industry veteran can capitalize on establishedbrands, expand its media offerings and make acquisitions to build market share.

Promotingpossibilities

CommerceConnect’s showcore actually sprouted nearly two decades ago. It was in 1982 that Minneapolisconcert and closed-circuit telecast promoter Greg Geisler and competitor JohnCaruso decided to team up to produce their events as Champion Productions.

Geisler raised $100,000 in initial workingcapital “from anybody and everybody we knew.” Since neither partner knewmuch about trade shows, they relied on concerts for cash flow until 1988.

In their second year, however, Champion teamedup with a small farm-show promoter to launch the Northern Illinois Farm Show.About 15,000 farmers attended the 25,000 net-square-foot event.

“We only made about $10,000,” Geislerrecalls, “but the beauty of it was that we got to do it again. It was a wayfor us to build equity.”

Similarly, another consultant approached Carusoand Geisler about a personal computer show. Champion launched its first StrictlyBusiness Computer Expo in May 1983, with 70 booths at the Minneapolis HyattRegency Hotel. Only 1,000 attendees came.

“I considered it a failure, but we reallydidn’t have much else to do so we decided to try it again,” Geisler says.“We took our concert-promoting principles and used them to drive people in thetrade show doors. By the time the PC revolution hit in the mid-’80s, we werein a great position, and suddenly the shows doubled in size and attendance everyyear for five years.”

Five more agribusiness and computer shows eachgrew from that start. After the computer shows peaked in the late ’80s,Champion co-located new events with them to grow the business. The MidwestPrepress shows (later renamed Digital Media Expos) came first and were laterfollowed by Careers in Technology job fairs.

“The Strictly Business and Prepress synergieswere so great that we went from a 600-booth show to a 1,000-booth show in a veryshort time — with a corresponding increase in revenue,” Geisler says.

1st sale

Champion’s large regionalcomputer and technology shows certainly caught Bill Windsor’s attention. Theformer Advanstar executive, along with private equity firms Bain Capital andTriumph Capital Group, had formed 1st Communications in 1996.

Windsor and his partners’ business plan wasto buy established event production companies and manage them as 1stCommunications subsidiaries. They’d made their first acquisition, ProfessionalTrade Shows, in January 1997.

“Bill and his group came to us out of theblue, and our reaction was that we didn’t want the hassle of trying to workout a deal,” Geisler says.

Windsor, however, liked what he saw enough topursue Champion and its 11 shows. “It was an opportunity to acquire a veryattractive business, with a very good manager who had an amazing group of peopleworking for him,” Windsor says. “The company’s shining star was StrictlyBusiness Minneapolis, which on a dollar-for-dollar basis is larger than many ofthe TradeShow 200 events.”

1st Communications acquired Champion in March1997. Neither Windsor nor Geisler would reveal the purchase price, but Geislersays it was a multiple of between six-and-a-half and seven times revenue.

After a brief consulting period, Carusodeparted. Geisler stayed and focused on keeping the venture capital investorshappy. “The shows were all pretty mature, so cutting costs was the way toincrease profitability,” he says.

Windsor and partners soon made anotheracquisition that fit Champion like a work glove: the 17-year-old Farmfest andtwo-year-old Dakotafest, both huge outdoor agribusiness events that occupy acresinstead of square footage.

“I’d always coveted those two shows and,within a month of coming on board, they were ours,” remembers Geisler. “Weapplied our promoting background and what we’d been doing with our other showsand grew both by 30 percent within a year.”

Swan song

Five years after Geislerand Caruso co-promoted their first event, Stan Sills took over PTN Publishing, aLong Island, NY-based company that, in 1937 launched Photo Trade News.Sills immediately started to add to his firm’s three-publication portfoliowith titles that include Wood Digest, Plastics World andFirehouse. In 1995, PTN also purchased Johnson Hill Press, a leading custompublisher in Wisconsin.

By 1997, PTN had enough assets to catch the eyeof two former Turner Broadcasting executives, Gerry Hogan and Blair Schmidt-Fellner,and their private-equity backer, who were hunting for a media companyacquisition.

Hogan and Schmidt-Fellner decided they couldprofit from the management skills they’d honed while working under Ted Turner.When they saw the magazines and custom publications PTN had assembled, they knewthey’d found their company.

“We saw an opportunity to make sense of allthe small pieces that Stan Sills had picked up,” Hogan says. “We could addstrategy and vision to the 50 titles there and build an integrated marketingcompany out of it.” Along with the magazines came events focused on thefire-fighting, kitchen and bath, remodeling and paving industries.

Hogan, Schmidt-Fellner and Kelso & Co.purchased PTN as Cygnus Business Media, named for the constellation of a swan.The purchase price was $97 million, a multiple of about one-and-a-half times therevenue of the PTN components Cygnus retained.

Cygnus 1st

In mid-’99, Schmidt-Fellner,Hogan and their financial backers bought a controlling interest in E-Markets.com,an agribusiness e-commerce platform. The Internet business fit nicely with theirexisting publications, such as Farm Equipment and Feed & Grain.However, the partners knew they needed more shows to expand their integratedmedia offering.

The Jordan Edmiston Group brought 1stCommunications to their attention, Hogan recalls. But after an initial offer forthe entire company, Cygnus withdrew its proposal, saying they would beinterested only in buying the Champion division.

“We were very impressed with Greg and hisexperience,” Hogan says. “First, he started, built and ran the company.Second, he’s a very smart man and, third, he’s a very likable man. When wetalked with Greg about what he wanted to do, we knew our plans fit well with histo grow his shows through magazines.”

Hogan says that Cygnus paid “in the $12million range” for Champion and its 13 shows. (1st Communications retained theCareers in Technology events.) The purchase brought Cygnus’ holdings to 18shows, 50 publications, 15 custom periodicals and 55 publication-driven Websites.

With the sale, Geisler’s original Championbrand was folded into the Cygnus name. He would oversee his 13 shows, but hismain responsibility would be to work what, under Cygnus, had evolved into twofire-fighting shows, two paving industry events and a construction industry showinto his mix.

“We wanted to use Greg’s experience to takeall the events to the next integrated level with the magazines,” says Hogan.“He was able to charm the people on the publishing side by explaining how hisshows could complement what we were already doing. Within a short time, oursenior vice presidents who ran the magazines, the group publishers and theindividual publishers were all saying, ‘This guy can help me make moremoney.’ ”

Quantum leap

Before that potential couldbe realized, though, yet another business transaction would unfold.

Mackler, after leaving Reed, was introduced toprinciples at ABRY Partners, a firm with interests in radio, TV, broadcasttowers, B2B publishing, and in-store advertising and marketing. Afterestablishing what their diversified communications company would be, the groupset out to assemble the pieces.

Media brokers approached CommerceConnect withseveral diversified B2B media companies, and the company bid on two firms inmid-’99. “In each case, we could not agree on the valuation,” Macklersays. “Our third auction was on Hanley-Wood, which we were bidding for beforeit sold to Veronis, Suhler & Associates.”

Then, Mackler and his partners changed theirstrategy, enlisting media investment banker DeSilva & Phillips to look forcandidates before they were up for sale. “We had a list of criteria, rangingfrom leadership to critical mass, and from diversification to Web presence,”Mackler says. “We were absolutely committed to not just acquiring a companybut acquiring a company that would let us build on the strong platform they’ddeveloped.”

According to Hogan, Cygnus was not for sale atthe time. The firm’s revenue was $66 million in 1997 and projected to be $96million in 2000. Profits were up, too, and Hogan and Schmidt-Fellner wereenjoying running the business.

But after considerable discussion, Hoganfinally told CommerceConnect’s representative that he and his partnerswouldn’t sell for less than $275 million, a multiple of nearly three timesprojected revenue. The
deal was consummated by this past June.

“The purchase price was
exactly my number,” Hogan says. “I was surprised because they
paid the full price, but I wasn’t surprised that they liked our company. Themore I talked with Paul, the more it made sense. They want to do many of thethings we planned to do. He knows the show side, and that’s where a large partof it will happen.”

Mackler says he and his partners remainconfident the purchase is not overvalued. “You’re going to pay a premium ifyou’re going to buy that type of company,” he says. “The previous ownersdid a very good job of improving the business in the time they had it. We’llbe able to take a good company and make it even better.”

Perhaps more in line with other industryreaction to the sale, 1st Communication’s Windsor says, “It seems like ahuge price for Cygnus. It’s very surprising. ”

Good showing

What shouldn’t be asurprise is that CommerceConnect’s exposition and conference holdings willplay heavily in its future success. According to Mackler, current revenue comes83 percent from publications, 8 percent from shows and 8 percent from custommarketing. The company’s optimal mix, however, will be 40 percent frompublications, 30 percent shows, 20 percent custom marketing and 10 percentInternet-related business.

“The change in mix doesn’t mean publishingwill become smaller for us,” Mackler explains. “But shows, custom marketingand Internet offerings will grow faster — with Internet offerings maybe evenoutstripping the others. It’s still too soon to know.”

CommerceConnect expects event growth to comeboth through acquisition and organically. Mackler points out that in the eightmarkets the company serves — agriculture, technology, construction equipment,imaging, public safety, shelter, transportation and retail — 27 different SRDSclassifications may be found. Those 27, in turn, currently representapproximately 250 shows and 1,500 publications.

“That’s the universe of acquisitionopportunities, just in the eight markets we’re already involved in,” Macklersays.

Mix master

CommerceConnect also mustmake the most of the relationships among its various media divisions. Macklersays “collaboration, not just cooperation” will be achieved through havingthose leading the show, publishing, custom marketing and Internet componentsdesign the working strategies themselves; by providing strong leadership tobring those forces together; and through providing sufficient compensation tothe players to make it happen.

Mackler’s ideal is to come up with acustomer-focused and customer-driven combination that will help clients achieveall their marketing and communication needs. Commerce-Connect has a long way togo to realize this in its current markets, but it has already shown, mostnotably in its fire-fighting segment, a hint of what can be accomplished.

There, CommerceConnect offers Firehousemagazine; firehouse.com, which plans to offer on-line auction capabilities bythe end of this year; Firehouse Expo; firehouseexpo.com; Fire Rescue West; andfirerescuewest.com.

“We’ll work closely with the magazine andthe Web sites to drive viewers to the site and the magazine, and they’ll dothe same for our show traffic and exhibitors,” says Geisler. “And when theauctions and malls are in place, that will drive audiences to the sites, whichmeans I’ll have just that many more chances to get people to come to theshows. Each part benefits from the joint effort with the others.”

Five out

Just how long it will takeCommerceConnect to achieve significant integration is anybody’s guess. Morelikely, the interplay between its media offerings will continue to evolve, asthe communication vehicles and customer demands themselves do. Mackler sayshe’s confident though that the shows will bring in more than 30 percent ofrevenues within the next five years.

As far as questions about new markets, ABRY’slong-term interest in the company and just how fast his company will grow,Mackler admits it’s too soon to tell.

“We’re 40 days into this (at press time); Ican’t tell you exactly how it will all play out,” he says, “but it’s anextremely exciting time for our industries, our customers and our company.We’re going to be the most exciting company in B2B marketing.”

Michael Flynn and Linda Kephart Flynn,writers and editors based in Kansas City, MO, are frequent EXPOcontributors.