Reed Exhibitions in December put its portfolio of domestic industrial and manufacturing events up for sale in order to focus on growth in other markets: health care and life sciences, security, health and home, and luxury/lifestyle/indulgence.
Reed has hired media investment banker Jordan, Edmiston Group to handle the sale. The portfolio includes AM Expo, Assembly Technology Expo and National Manufacturing Week.
"It's purely a strategic decision that we want to make going forward to reshape our business so that we can allot resources to focus on growth," said Beth Blake, public relations director at Reed Exhibitions.
Business media executives agree manufacturing is not a fast-growth sector, and one business media executive who asked not to be identified said, "The trade show business within that sector is even slower than that."
"We've seen those events continue to get smaller," he added,
Others agreed. "So much of the manufacturing industry growth [overall] is coming from places outside the U.S.," said Thomas Kemp, managing director at Veronis Suhler Stevenson, a New York-based banker to the publishing industry. Kemp said one of Reed's main events in that sector, National Manufacturing Week, "has been declining pretty consistently. It's been on a steady decline over the last four or five years."
Blake indicated otherwise. "They are good events and good teams that work on those events," she said. "We feel we've gotten evidence that they will continue to be profitable events going forward."
Blake said Reed has put additional resources and invested additional money in the shows in the last couple of years. "We're confident they'll provide good value going forward."
But to whom?
Kemp said that while it makes sense for Reed to focus on growth markets and divest those properties that are languishing, finding a buyer might be problematic. "It will be a challenge to find the right buyer for these products," he said.
Penton Media would seem to be the most likely candidate as a buyer because it serves the heavy industry sector, including manufacturing and design/engineering.
"They are the most natural strategic buyer for these events because of their strength in design engineering and manufacturing, but I don't think they'd have interest in buying shows that are declining," said Kemp, who was previously CEO of Penton. He added that Penton may be limited in executing large acquisitions because of its existing debt.
Penton executives and Reed declined to comment on whether they are in any discussions. Jordan Edmiston executives also declined to comment.
Kemp said most activity in b-to-b M&A in 2005 was among financial buyers, which are not obvious suitors for the Reed properties.
"What [Reed] announced is they have a defined group of vertical shows," Kemp said. "It's not an independent company with an existing infrastructure and management and accounting, and enough scale necessarily to be a platform. A financial buyer would have to build the infrastructure around it. It's much easier in a `carve-out' situation like this for a strategic buyer that already has that infrastructure and overhead and back office to be able to absorb new products."
Divesting the North American industrial and manufacturing trade show business doesn't mean Reed wants to get out of those markets globally, Blake said. The transaction does not include existing or planned manufacturing events in other parts of the world where manufacturing is growing rapidly. Blake said Reed would continue its international shows as well as expand those portfolios with new launches.
"We do intend on holding industrial events in emerging markets like the `brick' nations: China, India and other emerging economies," Blake said.