Feature
The Security Event by Nineteen Events groups . “ A PE investor will want to see launches and acquisitions in the first two years , giving them time to grow and become more profitable . If you know that you are selling in two years you need to focus on the best routes to increased profit , and acquisitions are often preferred over launches given they generate immediate profit .”
So , this sounds great in normal times , what happens when a global crisis like Covid-19 hits and normal investment horizons are stretched ? they raise money largely from Pension Funds or Family Offices for a given period ( typically five years ), and invest it as quickly as possible so that they can make good returns for their investors . That sets the tone for the whole roundabout . If a PE invests in an events business in the first tranche of its five-year life cycle it will expect almost certainly to sell within four years or maybe sooner . Having done that with all the other investments in its funds it hands back he proceeds to its original investors . “ The key indicator is usually return on capital . For every pound an investor puts in how many do they get back , the historical benchmark is about 2.5 . I have simplified it but that is what we have seen in our industry with Clarion being sold five times with an average cycle of four years and Closer Still , four times
with an average of three years . Charterhouse bought and sold Comexposium in four years and bought Tarsus at the same time . “ PE love our margins , which are typically 25 % rising to 30 % in a business like Closer Still , coupled with the fact that we generate cash up front and the fact that the venue ‘ slot ’ system guarantees us strong defensive characteristics . As Warren Buffet says : ‘ I like a business that you can build a moat around ’. The final reason is that there are many available assets as we operate in a highly unconsolidated marketplace with the two largest players owning less than 10 % market share . “ Totally unimaginable 20 years ago , vast sums have been spent on event assets . In 2018 and 2019 , there were five London based PE deals totalling £ 3.2bn . If we add the Informa / UBM deal , we saw over £ 7bn spent on trade show assets in London in 18 months . £ 7bn is serious money – it will affect how any industry is run .”
So , the obvious question , Phil , is how have these changes in ownership manifested themselves ?
“ I think there is an increasing divide in those companies that have benefited from this wave of investment and those that haven ’ t , primarily the older , larger and slower growing
“ That ’ s a hard one . RELX will sell their exhibitions at some point , but they will need to get a high multiple and it could be a product swap with Informa shedding their scientific and medical assets . Mark Shashoua will sell to a PE at some point and become a more active acquirer although I think we may have reached a high-water mark in terms of PE players in the business . In eight years , there will be fewer but larger trade show groups . Blackstone ’ s attitude is key – they have £ 1.4bn invested in NEC and
“ If you know that you are selling in two years you need to focus on the best routes to increased profit , and acquisitions are often preferred over launches given they generate immediate profit .”
June — 27