2020 was obviously a slow year with regards to M & A . For many corporates and private equity houses , it was more about strengthening cash positions of existing business and portfolio companies , and helping people weather the storm . As we ’ re seeing by the flurry of acquisitions , there is pent-up demand , and pent-up capital .
What has risen further and further up the list in terms of importance is resilience . Deeper scrutiny into how the business has traded over the last 18 months , and thus for many events-first and exhibition businesses how they were able to weather the storm , pivot and mitigate to retain earnings , and how quickly they are able to get back to pre-covid attendance and revenue levels .
There ’ s a natural shift towards a multi-channel model , which adds to resilience and ultimately quality of earnings .
What investors are interested in identifying is whether the company has high levels of recurring or reoccurring revenue . Strong client and revenue retention , well executed rebooks , cash conversion and margin contribution continue to be important characteristics . Businesses that are able to demonstrate consistent increases in average order values , high productivity on revenue generated per employee , provide a stronger investment proposition .
Another factor which will determine the attractiveness of an acquisition is market growth and market leadership . How big is the market , what ’ s
Resilience , growth , leadership and honesty
Collingwood Advisory director Daniel Pitchford supports entrepreneurs on strategy , scale-up , and exit planning . He describes the qualities exhibitions businesses need to secure investment
the penetration of the business in that market and what ’ s the white space ?
Scale is an important factor . Whilst £ 3m EBITDA has historically been the minimum , we ’ re seeing a certain move downstream and consider businesses which are smaller and less mature . That means there ’ s more competition across the market chasing high quality businesses , with trade and PE now looking at many of the same deals . Which for sellers is very positive , as there ’ s more scope to find the right partner for their business and vision .
Daniel Pitchford
With private equity there is a heightened focus on the strength of the management team , not just the founder or CEO but the team beneath them . Investors are backing the leadership team to grow the business . Platform businesses , will often have a buy-and-build angle to the growth story . And therefore need to demonstrate strong governance , process , and a well-developed operating model . Building relationships with potential partners is also important , many private equity houses will want to get to know a seller two or more years out from making an investment .
Private equity can be a compelling model for founders / owners depending on their appetite for staying with the business over the longer term .
Some people might want to completely exit in one to two years , which would be more akin to a traditional trade sale . In private equity , there can be a compelling share of upside further down the road , likely once your primary investor sells the business .
Sellers need to be honest with themselves , the business and potential partners about what role they want and importantly should , play in that . EN
58 — March