The Jordan, Edmiston Group, Inc.'s Richard Mead Predicts Busy Year in Trade Show M&A Transactions
Last week, when 175 for-profit show organizers got together for the Society of Independent Show Organizers’ CEO Summit at the Four Seasons in Las Vegas there was a definite buzz during the event that plenty of companies were looking to buy and sell.
Often in the center of many of those possible deals is The Jordan, Edmiston Group, Inc.’s managing director, Richard Mead, who has his pulse on exactly what’s happening in the trade show industry M&A market.
Mead took some time out of his busy schedule to talk about JEGI’s Q1 2014 M&A Overview that tracks deals across several sectors, including exhibitions and conferences.
According to the report, the first quarter of this year had 19 deals, compared with 16 in the same quarter last year. Deal value, however, dipped slightly in Q1 2014 to $162 million from $164 million in the same quarter in 2013.
Some of the deals in the first quarter this year were Reed Exhibitions buy of a trio of shows, one in the U.S. – Capsule, and two in Mexico for beauty and lighting; Tarsus Group’s purchase of the Cardiometabolic Health Congress, based in Boston, and the largest construction show in Turkey; Marketplace Events’ acquisition of Raleigh Spring Home Show and Raleigh Fall Home Show and the Edmonton Renovation Show; and Shepard Exposition Services’ acquisition of US Expo & Convention Services, to name a few.
Mead discusses what the trends are in the market right now and what might be on tap in the future:
1. There were 19 deals in the exhibitions and conferences sector, compared with 16 last year. What’s the business environment right now for trade show M&A transactions?
Q1 2013 might have been impacted by the rush to close US transactions in Q4 2012, for capital gains tax purposes. Otherwise, we don’t see that there is much difference between Q1 2013 and Q1 2014 in terms of number of transactions. However, as seen by the record turnout at the SISO CEO Summit this week in Vegas, trade shows and conferences continue to attract strong attention from a large pool of strategic and financial buyers. In addition, we are now seeing considerable interest in event services and technology businesses, and this adds another dimension to the market.
2. Deal values in Q1 2014 were marked by smaller one-off transactions in the first quarter. Will this trend continue? Or, are there more Onex deals (buyer of Nielsen Expositions) on the horizon?
Historically, larger transactions, like Onex’s acquisition of Nielsen’s tradeshow group, are completed by year end. Consequently, the first quarter of the year tends to be weighted towards smaller tuck in deals. There are a few sizeable transactions in the pipeline ($50+ million deals), both pure play events businesses and integrated media businesses that include events. We expect the pipeline for these size deals to grow in Q2 and Q3 2014, with closings in the second half of the year. There are signs that the event industry, including event services and technology, is beginning to consolidate, so we are likely to see a very active year in this sector.
3. PE seems to be very interested in the exhibitions market. Why is this sector attractive to them?
Trade shows are attractive to financial buyers for multiple reasons: 1) strong margins and cash flow characteristics that are appealing to lenders; 2) strong organic growth prospects; 3) deep pipeline of acquisition targets in most sectors; 4) opportunity for year round engagement through digitally-driven new revenue streams; and 5) generally speaking, a robust buyer pool when it comes time to exit – or even an IPO exit, depending on platform scale.
4. With the overall economy continuing to get a good foothold, do you see deal values and number of deals climbing?
An improving economy certainly helps deal activity, as confidence and capital are two of the main necessities for a healthy M&A environment. As well, the depth and breadth of the buyer pool and their need for quality acquisitions will bring more deal supply to the market. While most strategic event operators are now fully recovered to their 2008 levels and are starting to grow again, they need to make up for lost time. Organic growth on its own will not accomplish that; acquisitions are an essential component to their growth engine for the next five years. Some major event operators are more mechanistic than entrepreneurial in their approach to selecting acquisition candidates. This will tend to hold them back from making acquisitions, depriving themselves of the opportunity to very profitably leverage their infrastructure and global footprint. The risk evaluation applied to an event business needs to be balanced by a risk evaluation of not making that acquisition and thereby losing ground to competitors. And, the larger the event business, the harder it can be to find “perfect” acquisition candidates that tick all the boxes and move the group revenue needle.
The scarcity value that has applied to some recent event transactions that JEGI has been involved with should continue. The event industry is well regarded; better quality research is now available through CEIR and other industry sources; and the race to achieve a top 10 global position is on.
5. There are a lot of international companies buying around the globe, especially in Mexico. Any other countries that are particularly attractive at this time?
At SISO, it was interesting to see the global events companies looking more seriously to the U.S. market for acquisitions than in recent years, during which their focus was more on emerging markets. The size, stability and sophistication of the U.S. market is very reassuring to investors in global events companies. They will continue to develop their global footprint in emerging markets, such as Africa and Asia. Brazil and Mexico have also attracted a lot of attention in recent years, and there has been something of a local land grab by the global event operators to have sizeable positions in those markets.