Home TypeNews Phil Soar: Are the graveyards of the world full of dispensable exhibition organisers?

Phil Soar: Are the graveyards of the world full of dispensable exhibition organisers?

by Phil Soar
“The graveyards of the world are full of people who thought they were indispensable.”

It is traditional to start with a well worn cliché.

This is one I have been musing on for a long time now, as I have tried to decide why some trade show companies have been so successful, some merely mediocre, and many have never made it at all.

My long-pondered propositions are that:

a) The boards of trade show companies don’t make much difference at all – certainly not after the businesses reach stability;

b) The great “value creating” moments in trade show history have been the result of abnormal external factors rather than the genius of any individuals. And those individuals were fortunate to be there at that time.

I have finally decided to try to explain, being inspired by Simon Kuper’s truly outstanding book on Barca – Barcelona FC.

I admit that I am probably unique in having run a Premier League football club as well as one or two exhibition companies – and also by being fortunate enough to know Simon a little.

But Simon lays bare so much of the myth about the importance of the people at the top. He has analysed the success of football club managers and shown without question that their success is almost totally in direct proportion to the money they have had to spend on wages. How often have we sat in bars listening to football bores rhapsodise brainlessly about the magical powers of Alex Ferguson or Pep Guardiola?

Simon has argued, convincingly, there has only been one serious exception to the rule that money determines everything. And here again my interest is very personal – it was the incomparable Brian Clough.

Why Saudi Arabia’s Newcastle will not succeed

It is inconceivable that any other manager (since Herbert Chapman in the 1920s and 1930s) could have done what Clough did. It is no longer the case that even a Guardiola can bring success to a club – it is purely the talent which brings success.
Simon makes clear that it is the best players who run the clubs – that in Barcelona’s case for 30 years it revolved around Cruyff and Lionel Messi, what Messi wanted, who he wanted to play with, and how he wanted to play. Saudi Arabia’s Newcastle can spend whatever they like and offer whatever transfer fees they like – they will not reach the very top because winter in Whitley Bay will never attract Mbappe or Neymar.

Just turning up each day is 90% of the job.

So the question Kuper asks is: “What difference do the men or women at the top really make?”

As Simon says: “Large corporations are all based on the concept of replaceability. In all senior positions, just turning up each day is 90% of the job. The corporation succeeds because of processes built up over years, and in many top jobs creativity and unusual talent just cause trouble.”

So my hypothesis is that the two great value enhancing moments in the last 30 years in the trade show industry were not in any way driven by brilliant management – but by external economic forces. Rather like how leaves flow where the river takes them.

Creativity and unusual talent just cause trouble at the top

Simon quotes Robert Pickering, who wrote a famous letter to the Financial Times in 2014:

I ran an investment bank for a number of years and was regularly held up at gunpoint and told that I had to double someone’s salary to prevent him or her leaving (usually for Goldman Sachs). Sometimes I paid up and sometimes I didn’t – but the outcome in the long term was the same; the business went through peaks and troughs but life carried on. In 2000 (we were told) that the very survival of our 200-year-old firm was dependent on the continued employment of a 20-something individual who had been in the industry for about 18 months. We made him an offer (but he left anyway). A few years later I reminded my management team of this incident and none of us could even remember his name.”

 

So what difference does the boardroom make?

The best candidate will know nothing about events

When David Levin (the then CEO) was leaving UBM, a head hunter rang me to talk about the job (no, it certainly wasn’t being offered to me – I was simply an old head who knew David well). He told me that he had been asked to find a new CEO but the main qualification was that the candidate should not have any connection whatsoever with the events or exhibitions industry. The late Helen Alexander, then chairman of UBM, had apparently been behind this edict (one of her other legacies was apparently that lots of old Pauline girls got internships).

So I asked why was he wasting his time talking to me – as my expertise was largely in the very industry which was being blacklisted? He said he wanted to talk about what skills would make sense at UBM – I rather got the impression that he was bemused. This conversation has long stayed with me. Alexander had garnered an impressive reputation – CEO of The Economist etc – a true member of the great and the good, but…

Alexander, and presumably her board, had decided there was not a single, suitable candidate inside UBM to replace Levin, which if nothing else suggests rather poor planning. But also that there was absolutely no one else in the whole of our industry worldwide good enough to run what was then the second largest exhibition group in the United Kingdom. And, on top of that, someone with such expertise would not be of any value to UBM.

Does company morale make a difference anyway?

Eventually Alexander had her wish with the appointment of Tim Cobbold, previously CEO of Chloride (chemicals) and De La Rue (a banknote printer). I make no comment about that decision – whether it was the best outcome for the business or not (certainly UBM was sold to Informa for a very acceptable price – disclosure, I was a contented shareholder). But that sale price was (I believe) more a function of the rapidly rising sums being paid for trade show groups at the time than it was about UBM (it was 14.6 times profits, but within the same year there were two other major deals at 15.4x and 16.1x – so UBM was not exceptional).

At the time I felt that the very public rejection of the talent UBM did have inside the company would do very little for morale going forwards. It might also be worth adding that UBM has a long history of being run by CEOs and chairmen without exhibition experience – Baron Stevens (later a UKIP Peer), Clive Hollick, David Levin, Tim Cobbold etc.

One might also posit another interesting question: “Does company morale make a lot of difference to valuation and performance anyway?”

hose readers who know me might be surprised at this question – CloserStill was named as one of the Sunday Times Best Companies to Work For in 2018, 2019 and 2020 when I was CEO (the competition didn’t run in 2021 or 2022) so we surely encouraged a caring staff. Yes – but, looking at some of the businesses which have sold for large amounts of money, I still think the question more than valid.

Dissecting the great successes of our world

So how do the great successes of the exhibitions world come about? Can one rigorously dissect them? Though I am obviously prejudiced, Blenheim is still the outstanding story – going in just five years from a small local business making £3m a year to being the biggest in the trade show world.

But how? There are many things Blenheim was not. It was not a smoothly operating perfect machine – there were far too many acquisitions to be absorbed for that. It was not a harmonious well oiled board – the founder left the board after an intense, disruptive internal row, and by 1995 four other directors had left and the hostile bid from UBM was consequent on boardroom splits. It was not a perfectly ticking financial machine – early in 1990 three of us spent a whole weekend trying to work out exactly what the group’s overhead was (no one was sure). It did have superb operational people – notably Alison Berends, Steve Monnington and Christopher Crowcroft. It also had great show directors – Brian Wiseman, Stephen Richards, a young Paul Thandi. But that was not the secret of Blenheim’s success.

Blenheim was about one simple – but profound – insight.

That secret was just one simple insight, which was that these little known trade show things were wonderful cash cows which could be acquired for almost laughable multiples of profit – often no more than 3 or 4 times annual EBITDA; while at the same time magazine groups were going for 15 or 20 times. Added to which, we could buy them for paper (shares in Blenheim Group plc) and thus did not have to fork out cash. That perception was shared by a few of us – but more credit goes to Neville Buch than most. The storied value of Blenheim ultimately rested on that one insight – not on any genius from board members (least of all me). (Blenheim eventually sold for 13.4X profits).

In that same period (roughly 1989 to 1993) both Reed and EMAP grew apace for the very same reason – but Blenheim was the more aggressive. EMAP were reluctant to move outside the UK, and Reed always had to satisfy a corporate board at a higher level and could only pay cash.

All three companies – then the three biggest in the UK – grew for one reason at that one, never to be repeated, moment in time; not because the managements were staffed by Isaac Newton and Steve Jobs.

Success is usually about one moment in time

I think the same is true of the second great value creating era for trade shows. Look at the enormous growth in value of some of our larger companies in recent years – UBM, Clarion, Emerald (for a time), Tarsus, Comexposium, perhaps CloserStill. And the massive influence of private equity on the whole sector. This again was essentially all about a moment in time. Trade shows did not magically go from deals worth say £500m  a year in 1999 to £7 bn in 2018 because of the sudden inspirational drive of their management.

This particular moment in time was a function of two things – falling interest rates and rising stock values; the combination of the two fuelled the private equity boom. US base interest rates fell from 20% in March 1980 to 0.25% at the end of 2021.

The Standard & Poor 500 Equity Index (the broad based proxy for the US stock market) rose from 111 in 1980 to 4,725 at the end of 2021. That’s a 43 fold increase – or 9.5% per annum every year over 40 years.

Investors bought into the exhibition sector at much lower multiples in the early 2000s – say six or seven times profits – and sold at 14 or 15 times profits by 2016-2018. The deals were largely funded by debt – and the interest rates on those borrowings just kept falling. You could double your money by just standing still.

But – and here is the rub – Spring Fair, World Travel Market, DSEi, IFSEC, Ideal Home and BETT etc did not suddenly become wonderful, ground breaking new shows in that period (in fact half of those six were smaller). They had not amazingly become different, nor in any real way more valuable assets. (A qualification before you email me: assets are always worth what someone will pay for them. By definition they were more valuable because buyers were prepared to pay more. But a Van Gogh is still the same painting even if its price doubles in five years).

In just five years trade shows were suddenly worth 30% more

Between 2010 and 2015 the 10 reported trade show acquisitions which are analysable were at an average multiple of profits of 10 times. Between 2016 and 2019, the 10 reported analysable acquisitions were at an average multiple of 13.1 times profits. Management of these companies did not suddenly get better – in fact six companies feature in both of those lists of ten companies. Just as Blenheim became so valuable because it bought great shows at low prices, so falling interest rates and rising stock markets made trade show companies much more valuable in the last ten years (we’ll ignore Covid for the moment).

The multiples I will quote are all taken from public sources. Often there are different multiples quoted because of the timing of the sale (say March or December), or because of the effect of biennials etc. But the broad trend line is correct. Take the largest – UBM. In the first half of the decade UBM made two acquisitions which became a part of their company – IBE at 12.4X profits and Advanstar at 10.0X. In 2016 they bought AllWorld at 14.3X . Then in 2018 Informa bought UBM at 14.6X.

A management team could just sit and wait

In January 2015 Clarion was sold at 10.2X. In July 2017 it was sold to Blackstone for 12X. CloserStill had three separate private equity deals in this period –in 2012 at 8.3X, in March 2015 at 12.0X and in December 2018 at 16.1X (this was the highest multiple achieved for any acquisition in the decade). I stress again that these figures are all from the public record and other sources may give slightly different numbers. That does not invalidate my point – which is that by and large these companies made some acquisitions but did not essentially change – and that multiples (and thus the supposed underlying value of all these companies) grew consistently during the decade.

All a half competent management team had to do was to sit there and wait.

The simple analogy is your house. Say you bought two years ago for £500,000, of which you borrowed £400,000. You got a 2.99% interest rate – so you paid £12,000 a year interest. You have just sold it – and the house has magically risen by 25% (as houses have in many parts of the UK – or even 50% in Florida and Colorado). So you got £625,000 for the house. You pay back the £400,000 to the bank and you have spent £24,000 on interest in the two years. So the £100,000 you put in has magically become £201,000 (I have ignored other costs to make the calculations simpler).

You have doubled your money. But it is still the same house. Nothing has changed.

What matters is always the individual shows. Like the constellations, they have a very slow procession through the skies – 12 or 24 months – and they don’t change very much from year to year. Allowing that some shows have disappeared, the 10 largest still extant shows of the UK of 20 years ago are still the 10 largest today (accommodating detail changes such as Furniture Show taking over from Interiors). Board rooms have not made much difference to this progression.

Why don’t we transfer talent like soccer?

Which brings me back to football. The success of football clubs in the past two decades, Simon Kuper shows, has been solely about the talent and, above all else, buying that talent. There is an almost pure, direct relationship between success and salaries paid. Of the Chelsea 11 which started their first game in 2022 nine had been bought. Manchester United also had just two home grown players in their 11.

It seems to me that exhibition groups are not dissimilar. The talent is the individuals who run the exhibitions. Yet we almost never see them being transferred from one group to another. This is odd, because a great exhibition director – a Brian Wiseman, an Alison Jackson, an Anna Knight, a Mary Claire Boyd, a Rob Chapman (apologies for embarrassing them again but most writers are far too reluctant to praise) – really can make a difference.

But do our companies go out and buy the best, proven, talent – or, more relevantly, why don’t they?

Partially because some have specialty fields – but the acquiring company could therefore compete in those sectors, and the genius of the individual doesn’t go away.

Partially because the anti-Darwinian slot system means that our groups are rarely competitive with each other, so we don’t spot stars.

Do we assume that things will never change?

Largely, I suspect, there is an assumption at board room level, that people won’t change things much anyway – that World Travel Market, BETT or DSEi are what they are. That the shows have achieved the penetration they will achieve, and that the complacency which comes from the slot system assumes there is little surge of profitability or danger of decline. Even the best show director in the land won’t make much difference.
Senior show directors don’t move around that much either. They are usually paid rather well for what is, in truth, not the world’s most demanding job and rather a pleasant one at that. We may all feel that we work incredibly hard to keep our show on the road, but running a well established event (believe me) does not compare with setting up a business in Tokyo from scratch, nor running a major football club, nor publishing five magazines every week. Nor does it compare with the really tough jobs we pay homage to (NHS, cleaning, warehouse picking at minimum wage, coal mining) but rarely have direct knowledge of.

Several of our bigger groups have decided recently that McKinsey can consult and solve their problems. But if McKinsey is their answer, then I suspect they are asking the wrong question.

There have been two great value creating times in 30 years

My hypothesis is simply that the personnel in board rooms rarely seem to make an obvious difference to success of our larger companies. I am not suggesting that we (I have to include myself) are incompetent – merely that we don’t make as much difference as we would like to believe (a good team can make a difference in finding good rather than modest acquisitions, and not buying bad ones – that I will concede).

Basically, there have been two occasions when trade show groups have seemed to magically generate great success and value, and a fair number of people got quite rich.

In the early 1990s it was a function of the really big media groups completely missing the potential of these scrubby little things called trade shows. And in the post-crash era 2008 to today it was falling interest rates and the wall of money which enhanced the apparent value of these assets by some 50%.

We have now gone through a generation and more of trade show leaders since exhibitions emerged from the mist – is it fair to ask how many of us were really indispensible, and would really be remembered?

As The Economist has recently highlighted, an honest leaving speech for most senior executives might well read:

I asked around Bill’s employees if they could remember memorable stories about his last 10 years. Someone mentioned that you once fell over at a party, but, then again, that might have been Jack. And you were stuck in the lift one Christmas………. Several people mentioned how much they enjoyed those three hour long budget review meetings. Anyway, here is a card signed by a lot of people you probably don’t know but who claim they will really miss you. I would like to think that you will long be part of company folklore and your name will reverberate down the ages – but in truth no one will ever look again at all those files in your office, nor all those spreadsheets on your PC (do take it by the way – with our compliments). You have done your job well enough, you and the company have managed to survive ten years – so here’s to a colleague who wasn’t any more indispensible than the rest of us.”

 

Related Articles