After a flurry of deals in December the new year has been quiet for M&A activity says Steve Monnington, of Mayfield Merger Strategies. But he predicts private equity deals will dominate for the rest of the year and into the next few
After the flurry of deals (seven) in December, the new year has started relatively quietly. The Italian Exhibition Group (IEG), was formed in 2016 by the merger of Rimini Fiera and Fiera di Vicenza. Their acquisition strategy is focused on acquisitions in their core sectors and is targeted both within Italy and internationally. Wellness and sports is a key sector (RiminiWellness is one of their main brands).
In October 2020 they moved into a brand new territory when they acquired HBG Events, organiser of the Dubai Muscle Show and Dubai Active (a small deal worth around €900k plus an earnout). Now they have moved into another new geography in the same sector, acquiring Brasil Trading Fitness Fair which focuses on sports equipment, supplements, healthy and organic food as well as fitness clothing and accessories.
It’s unusual to see large organisers set up new subsidiaries in new geographical markets for single show acquisitions so we should expect IEG to target acquisitions in Dubai and Brazil in other key sectors such as food and beverage, jewellery and fashion and lifestyle and innovation.
Messe Munich has acquired Asia Climate Forum (ACF) from Media Generation Ventures and, in 2022, will run it alongside the CleanEnviro Summit Singapore owned by the National Environment Agency, and Singapore International Water Week which is owned by Singapore’s Ministry of Sustainability and the Environment and PUB, Singapore’s National Water Agency. Both co-located shows are biennial. ACF was launched in 2014 and is the umbrella for three distinct exhibitions – InterMET, InterFLOOD and InterAIR.
It will join Messe Munich’s portfolio of events in the environment sector – including IFAT, the world’s leading exhibition for Water, Sewage, Waste and Raw Materials and the IE Expo series in China which focuses on Environmental Technology Solutions for Water, Waste, Air and Soil.
Media Generation has a long history in the energy and environment sector having launched All Energy which became the UK’s leading alternative energy exhibition and conference and was acquired by Reed Exhibitions in 2011.
Infopro Digital, one of the top 10 French technology groups has acquired EventMaker, a French company that has created web-based software to manage physical, virtual and hybrid events for trade fairs, congresses, event agencies and corporate events. With virtual events booming during lockdown and hybrid events popular as organisers combine physical and digital, this is a crowded market but Infopro are present in 17 countries and the potential for international expansion must have been a key factor in the sale.
Role of private equity
This edition of Exhibition News focuses on the role that PE plays in the exhibition sector. A few weeks ago, I was interviewed by Dan Assor for the Dan Assor Show on LinkedIn Live. For 30 minutes we talked about the effect of the pandemic on acquisitions, whether the M&A market has recovered and what trends I expected to see in 2022. If ever something was designed to dampen the enthusiasm of private equity for investing in a business, it would surely be something that effectively shuts the business down for at least 18 months with no ensuing revenue and where subsequent revenues were unlikely to recover to 2019 levels until 2022 or even later.
However, I have been surprised and encouraged by private equity’s response to Covid-19, continuing to fully support the companies they have invested in and quickly resuming their acquisition activity and, when Dan asked me about one likely trend for 2022, I found myself saying “2022 will be all about PE”.
Much as I hate agreeing with Phil Soar, he has a bird’s eye view through his chairmanships of CloserStill Media, currently owned by Providence, and Nineteen Group, currently owned by Phoenix Equity. His contention that the world of exhibitions revolves around PE is much truer today than it was five years ago and will be truer still in two years’ time.
PE investment has only been able to operate in the exhibition sector because of the fragmented ownership of exhibitions and the constant stream of entrepreneurs who create them. It is this, together with the positive cashflow characteristics that has attracted PE interest. In addition, the relatively short time horizons for PE investment (initial investment to exit) have moved the business of exhibitions well beyond the mere organisation of shows into a financial exercise for the PE firm, the management team of the company they own and the entrepreneurs who create and then sell their businesses to them.
More acquisitions means more money
The more successful acquisitions that can be made, the more money PE makes. When it’s time to exit, the buyer of the business is usually another PE firm and the faster fresh capital can be deployed on more acquisitions by the new PE owner, the better the rate of growth in the overall value of the business as can be seen in the case of CloserStill Media.
• 2012 – Northern Venture Management sold to Phoenix Equity for £25m
• 2015 – Phoenix sold to Inflexion Private Equity for around £100m
• 2018 – Inflexion sold to Providence Equity Partners for £340m
The success of this model depends on there being enough businesses to buy and this will be a major factor in how M&A develops in the future. An organic launch (unless it’s a replication of an existing show into another market) is too slow for PE owners given the short time horizons for their investment. This means that most of the portfolio of a PE owned exhibition organiser is derived from acquisitions.
Three reasons why 2022 is all about PE
There are three reasons why 2022 and indeed the next few years will be “all about private equity”.
i) PE firms usually have a five-year time horizon but in reality it’s often shorter as the sale dates for CloserStill Media above shows.It’s generally accepted that the last two years have put the exit plans of PE firms such as Blackstone (Clarion) and Providence (CloserStill) back by a couple of years. Blackstone acquired Clarion in 2017 and Providence acquired CloserStill in 2018 so we should expect an exit by both in the next three years, probably sooner in the case of Blackstone. Whether the sale is to another PE firm (in which case incoming capital is likely to be quickly deployed in the form of an acquisition drive) or a trade sale with the accompanying integration issues and senior management exits, it will be very interesting to see what happens post-sale.
ii) Several of the PE firms are serial investors. Notable among these are Providence (who have held investments in George Little Management, Clarion and now CloserStill Media), Phoenix Equity (former owner of CloserStill Media and now invested in Nineteen Group) and Charterhouse (who owned 50% of Comexposium and now own Tarsus). So it’s nice to see a couple of new entrants backing UK exhibition executives. Apiary Capital backed Duncan Kirk and his team (ROAR B2B) who have made two acquisitions so far – several shows from what was Prysm and also the Environment Media Group. EagleTree and their partners Canson Capital backed Simon Foster (Arc) and have also made two acquisitions – Lamma and Farmers Guardian from AgriBriefing and Farm Business Innovation from Fortem International (formerly Prysm).
Along with Phoenix/Nineteen, Arc and ROAR are very much in their early stage and are hungry for acquisitions. As Simon Foster points out (p26) there is a lot of money looking for a home so this can only be good news for potential sellers. There will undoubtedly be several acquisitions made by these three.
iii) Several senior executives have left the exhibition sector in the last couple of years and several are in discussion with potential PE backers (especially in the USA) which means that there are likely to be more PE firms entering the sector which will fuel the demand for more deals.
All this activity raises the question of whether there are enough high-quality exhibitions available to feed collective appetites. In the short term I believe that there will be, but over time it’s inevitable that demand will outstrip supply. The PE model depends on growth by acquisition and then exit – standing still isn’t an option, so we could start to see consolidation amongst the PE owned exhibition groups as we have among the publicly quoted trade organisers.
This column appears in the March issue of Exhibition News.