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April 4, 2008
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Steve Monnington: Has the UK exhibition sector suddenly become sexy?




It’s been a busy few weeks in the exhibition sector for the private equity firms. First we have the proposed EMAP breakup with four private equity funds bidding for the B2B division and then we have the sale of Ocean Media, which was only acquired from Trinity Mirror 15 months ago and has now been sold on. Both Ion Equity and the management team have exited Ocean, to be replaced by AAC Capital partners and a management buy in team.

It is only fairly recently that private equity money has made its way into the UK exhibition sector with Hg Capital financing the MBO of Clarion Events and with Northern Venture Management backing the MBO of Penton Media Europe (which became Ithaca and has now been sold to CMP). So what has attracted the funds to the UK? Has the UK exhibition sector suddenly become sexy?

Nothing has actually 'suddenly' happened. Private equity funds have been attracted to the trade exhibition business for some time as they like the reliable positive cash flows and online potential. However, they are also attracted by size, so to date their involvement has been primarily in the USA where it has been possible for them to buy businesses of scale. In the USA, Advanstar, Penton Media, Nielsen and Questex are all backed by private equity funds.

Things in the UK look set to change
The only reason why the UK hasn’t seen activity on this level before now is because there hasn’t been enough scale to attract the funds, but that looks set to change.

It looks likes EMAP’s B2B business, valued by some at £1.2bn, will be owned by one of Providence, Cinven, Candover or a combined Apax and Guardian Media Group (GMG) consortium. Apax will see parts of EMAP’s portfolio as a good fit with Incisive Media, in which it already has a shareholding. Guardian Media has already talked about diversifying outside newspapers and radio.

What is particularly interesting about the bidders is that, with the exception of GMG, there isn’t a single trade buyer – it’s all private equity firms. United Business Media was originally thought to have made it through to the second round, but chief executive David Levin has confirmed that no bid has been made. Reed has also decided not to bother.

Several people have asked me if private equity involvement is a good or a bad thing for the exhibition sector. For the management that is being backed, there are substantial financial rewards to be had upon exiting as the Ithaca management proved recently. It’s also positive for smaller organising companies wanting to sell their businesses as the time between buy in and exit seems to be getting shorter and shorter, and the only way for private equity funds to achieve substantial capital growth is to acquire. So the acquisition market has been stimulated.

Private equity: good or bad?
There is divided opinion on whether it’s positive for the exhibitions themselves. On the one hand, having a private equity shareholder places more emphasis on the financial dynamics of the business, pushing management to chase new revenue sources more aggressively and encouraging greater cost control in order to improve margins.

However, the short-termism that is built into private equity funding coupled with the desire/need to maximise profits could lead to over zealous cost cutting, which in turn could damage the quality of the exhibition. In addition, the acquisition and exit processes are both enormous diversions for senior management, and when they both happen in a short time frame, precious management time that should be spent on strategy and growth is being spent with bankers and lawyers instead.

Private equity funding of exhibition businesses is here to stay as long as there is growth to be had – and this can be organic or by acquisition, so it doesn’t necessarily depend on rapid expansion in the shows themselves. Given the fragmented ownership structure of the UK exhibition sector, with very few large properties available for sale, I suspect we will see more of the smaller Ithaca-type deals and more entrepreneurs being backed on start-up 'buy and build' strategies. It certainly won’t be dull and there will be lots of money to be made.

Steve Monnington is managing director of exhibition acquisition and business development specialists Mayfield Media Strategies


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