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assets is declining as the bigger groups acquire more of what is available . As Informa ’ s recent announcement to sell certain assets and invest some of the proceeds in events indicates , the signs are that trade shows are again seen as very appealing acquisitions .
The other side of the story But there are negative stories as well , the most often quoted being Toys R Us . In 2004 the well known 69-year-old retailer was acquired for $ 6.6bn by two PE companies – Bain and KKR – and a property company , Vorando . But 80 % was borrowed and Toys R Us had to pay much higher annual interest charges as a result .
In 2004 it had $ 2.2bn in cash , by 2017 that had shrunk to $ 301m . Its overall debt had skyrocketed to $ 5.2bn and it was paying between $ 425m and $ 517m in interest every year . The consequence was that the company did not have the funds to revamp its stores or compete aggressively with Walmart and Amazon . Interest charges were consuming 97 % of its operating profit . In 2018 it announced it was closing 900 stores and 33,000 people lost their jobs .
It is usually retail where we hear the negative stories and the long slow decline of Debenhams was another example of funds paying themselves large dividends .
I need to stress there was nothing illegal or dishonest here .
Shareholders of any company are entitled to vote themselves dividends as long as the business has the wherewithal to pay them .
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So how does private equity work with trade show companies ? I have been involved with nine PE deals involving exhibition companies . In none of those cases – nor in any other case that I know of – could PE be accused of a short-term approach nor of extracting funds from the business .
I cannot stress enough that in every case the approach has been to reinforce the business , leave a large percentage with the previous owners and staff ( typically 20-30 %) and then to invest in the company . This has typically been by funding acquisitions and investing heavily in systems . In the last 20 years this can be shown to have been very successful indeed .
If we take the most obvious examples on public record . Clarion had been valued at some £ 44m in the early 2000s . In 2008 it was valued at £ 120m , in 2015 at £ 215m and in 2017 at £ 600m and it would certainly now be valued at north of £ 1bn . CloserStill , founded in 2009 , was valued at £ 25m in 2012 , at £ 125m in 2015 and £ 340m in 2018 .
It is worth mentioning that these numbers are not the price the company was bought for in cash . If a PE house buys 70 % of the equity , then it obviously only pays 70 % of the value . The prices which I quote are almost always from the public record . In the case of any PE deal , the PE companies themselves give their own investors details of the deals they do . Thus they tend to be largely transparent .
Clearly the companies quoted on the public markets
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have benefitted from these trends . The share price of UBM rose from £ 5.17 in 2013 to £ 10.77 in 2018 , though some of the profit improvement was a result of acquisitions ( I was a shareholder in both UBM and Informa ).
In only one case to date has there been a material change in the management of the business , and that is in the rather unusual situation of Emerald in the USA . Onex , a Canadian PE firm , acquired Emerald and then chose to float it and we have seen an unusually dramatic decline in value – from $ 23 per share in 2017 to just $ 3.39 today .
Private equity and the trade show business The reader might say that I am biased , having been intimately involved in Blenheim and CloserStill and a number of other PE deals such as Spearhead , Upper Street and Nineteen Events .
But the records of both Clarion and CloserStill do suggest strongly that the preparedness of PE to back managements and provide investment has been a major positive . Clarion – still run by Simon and Lisa as well as
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Russell – has grown from a value of £ 44m to ( probably ) more than £ 1bn in the past 20 years .
In less than 10 years CloserStill grew from literally nothing to £ 340m , via three PE deals . It is certainly not a matter of PE funding acquisitions – of the 50 shows CloserStill currently runs , 35 were launches .
In addition , both Earl ’ s Court Olympia and the NEC have been owned by PE .
It is very unlikely that many of our larger exhibition companies and venues could have grown the way they have , and employed the number of people they have , had they not had access to the phenomena of venture capital and PE . Nor would West London be the centre of the world ’ s trade show industry . The counter-factual of “ where would we be if that funding hadn ’ t existed ?” is impossible to answer .
It is also now not very material PE and public funds is the world we now all live in , and the world which will largely determine how our business develops in the next decade and probably beyond . EN
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