Remaining positive about events industry M&A

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Like every other sector of the media business, events-related merger and acquisition activity withered in the fourth quarter of 2008, when only three of the year's 35 events industry deals took place. Nevertheless, we feel secure in predicting that the events sector will outperform most other media sectors in the 2009 M&A market, based on our examination of deal activity from 2005 through the first half of 2008. The total value of all 2008 events-related transactions was $552 million, or 28% of the total media deal market as we define it; that is, deals involving at least one U.S.-based company in the digital media, magazine, marketing services and health care media arenas, including b-to-b and consumer media but excluding newspapers, book publishing and entertainment. Of the 35 event transactions in 2008, 28 involved business-to-business sector companies, including three medical events/continuing medical education companies. The previous year, by contrast, there were 39 events-related transactions, of which 31 were in the b-to-b sector, with a total value of $1.7 billion. (The largest deal by far in 2007 was the $1.1 billion acquisition of Advanstar by Veronis Suhler Stevenson.) The acquiring companies in 2008 can be broken down into two types: financial sponsors, which for the most part were private equity funds buying an events company for their portfolios; and strategic acquirers, consisting of companies already in the media or events business themselves and not backed by a private equity fund. In 2008, financial sponsors were the acquirers in all but one of the top deals, with only Dow Jones & Co. representing the strategics. But strategics dominated the smaller deals. While most of the strategics' acquisitions were small, many of the buyers were not: Hanley Wood, PennWell Corp. and United Business Media (UBM) all seized the opportunity to expand. UBM was the most active buyer of any kind, making three U.S. acquisitions each on behalf of its subsidiaries CMP Technologies and Live Media, plus several more abroad (not counted in our total because neither buyer nor seller was U.S.-based). True, the 35 event-related deals of 2008 represent a decline from the 39 deals of 2007 and the 45 deals of 2006, but not disastrously so. No one doubts that 2009 will be tough, but we expect that the events industry's share of the M&A market will grow. In fact, a recently issued white paper jointly authored by AMR International and DeSilva+Phillips elaborated on two of the reasons we expect the events industry to thrive, relatively speaking. First, the events sector is the part of the traditional media business least threatened by online media innovation. The fact is, online cannot deliver the face-to-face experience of attending an event, at least not so far. At a recent DeSilva+Phillips Media Dealmakers Summit, Mike Rusbridge, CEO of Reed Exhibitions, described the unique impact of live events. According to him, “The notion of something that happens once a year now seems distant to many businesses. But what we do is similar to what digital players do when they create a sense of community. At an advertising [festival] in Cannes, someone from Manhattan came up to me and said, "In five days here, I've seen more of the people from Manhattan that I need to see than I ever see in a year in New York.' ” The other reason for the continuing strength of the events industry, and prospects for continued merger-and-acquisition activity, is its relatively adaptable business model. Yes, an economic downturn puts pressure on events revenue—there are fewer attendees, sponsors and exhibitors. And indeed, the 2000-2002 recession saw many famous event brands, such as Comdex, suddenly collapse. Nevertheless, the event operator often has more control over marginal costs than the manager of a print or online ad-supported medium. Managers can rapidly and relatively inexpensively open, close and clone events to meet changing economic, geographic and technological changes. And unlike online advertising inventory, the calendar and the number of appropriate venues are finite. Attendees and sponsors must choose as carefully as ever where to invest their time and money. As advertisers become somewhat cynical about the value of media brands, and as readers and site visitors demonstrate their fickleness and unpredictability, we think an increasing proportion of media owners and investors will be drawn to the relatively calm and predictable harbor of the event business during the next year or two. Sam Schulman is managing director of media investment firm DeSilva+Phillips, in New York. He can be reached at [email protected]
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