“They’re hoping that with better operational results, a better company and a better market will get them the price they want,” said Mark Edmiston, managing director of media merchant bank AdMedia Partners. “The risk is the market gets sour and Advanstar goes south.”
Hal Greenberg, managing director at media investment bank Veronis Suhler Stevenson, said Advanstar “believes that its intrinsic value is higher than the bids they got.” He said that in about a year the financial outlook will be different for the company “because the legacy costs [associated with the sale earlier this year of some of its assets to Questex Media Group for $185 million] will not be there and they will have higher earnings.”
Reed Phillips, a partner in media merchant bank DeSilva & Philips, disagreed, saying, “Buyers looking at the company have already factored in those costs.” Despite the strong interest in the company, “there was discipline on the part of both seller and potential buyer,” he said. “Both groups didn’t want to budge and they were probably playing chicken till the end.”
Advanstar, which is owned by a Credit Suisse First Boston private equity fund, announced late last week that it was bypassing a sale and would instead grow its portfolio. Advanstar operates the MAGIC fashion industry trade shows, health care properties and power sports properties.
“Do I think in two or three years that we'll be out there again? Sure,” Advanstar President-CEO Joe Loggia said.
Loggia pointed to Advanstar’s third-quarter results, which showed improvement in revenue and EBITDA (earnings before interest, taxes, depreciation and amortization), as proof the company is moving on the right trajectory. Revenue increased 9.9% to $85.7 million, from $78.0 million in the third quarter of 2004. EBITDA increased 14.6% to $30.8 million, from $26.8 million.
Some industry observers believe the move to abandon the auction is a risky one. First, it is dependent on the b-to-b media market remaining strong and Advanstar continuing to show strong EBITDA growth. Second, it presupposes that the strong b-to-b media mergers and acquisitions market will remain robust.
And, third, the decision contains the hope that the entities that were interested in Advanstar this time around will continue to be interested in the future—despite being angered about spending hundreds of thousands of dollars on an aborted auction process.
Some observers say Advanstar has suffered a black eye by not completing the auction. Still, others point out that Thomson pulled Thomson Media from the market when it couldn't get the price it wanted in 2001, but its patience eventually paid off when it sold the business earlier this year to Investcorp for $350 million.