CHICAGO — Merger and acquisition activity has been heating up in the trade show and exhibition space post-pandemic with outside investors coming in and consolidation throughout the industry.
To understand more about the M&A trends being seen and the investment and funding landscape, Trade Show Executive talked with Arc Group CEO Simon Foster and Terrapinn CEO Greg Hitchen about the rise of private equity in the trade show and events industry.
Terrapinn is now one of the largest privately-owned event organizers, and Arc is backed by investment funds managed by EagleTree Capital.
Identified Trends
Both Foster and Hitchen said the industry is attractive to private equity in financial terms and growth.
“Private equity loves the trade show industry,” Hitchen said. “And the love affair has been going on for some time; they love the cash-generative properties and there’s been a decent secondary market.”
Hitchen said that when looking at some of the largest organizers in the world, approximately more than half of them are owned by private equity. “Even six years ago, that wouldn’t have been the case. Private equities are becoming more and more prevalent in the trade show industry.”
Simon also agreed that the industry is financially appealing to private equity, especially in the U.S. now.
“Despite consolidation, our market remains relatively fragmented with lots of new entrants all the time,” Foster said. “I do think the last few years have seen the U.S. market raise back to the ‘top’ in terms of opportunity and focus, after China and Southeast Asia were vying for that position before. Clearly the Middle East and Saudi specifically are experiencing high growth as well, but the scale of the U.S. market means it remains the key place.”
Reinforcing the U.S.’ appeal, Hitchen said that he is interested in developing a much bigger footprint in the country for Terrapinn.
Foster also shared that he is noticing that companies that would have been seen as key buyers previously, are now in “preparing to sell mode.” He also notes some tension in the market as companies look and wait, causing deals to move slower and with more interrogation.
“In short, I would say the key trends are that there are more buyers in the industry and that is increasing interest and potential deal volume, and potentially prices,” Foster said. “Obviously the ‘COVID break’ disturbed that trend but it is now back. I also think it means that there are more types and scale of buyers, giving a wider range of event business types and sizes more sale/investment opportunities. I think this is an interesting and critical point for us as an industry, as event companies have never been homogeneous but now there is even more variety of businesses and models. Therefore, I think this is a key trend as investors are more open minded and interested in ‘new’ models.”
Benefits of Different Models
When it comes to private ownership, Hitchen said that while there is usually less capital and less opportunities for major acquisitions, there is no shortage of entrepreneurial energy.
“A positive for being privately owned, at a certain scale, you can take more risks. I think you can get closer to your markets, and the business can grow with a more organic or natural cadence,” Hitchen said. “Of course, there is the benefit of having control of your destiny and I think also being more creative. Trade show businesses or media businesses need a creative core.”
Hitchen also shared his views of the benefits of being owned by private equity which included access to much more capital, the ability to generate faster growth and complete bigger acquisitions.
“The negatives [of private equity ownership] are organizers being controlled by non-media people and a stronger culture of risk aversion,” Hitchen said. “Sometimes private equity can force companies to grow too quickly and make decisions that are not really financially or otherwise beneficial in the medium- to long-term.”
When asked what he views as the benefits and drawbacks of private equity ownership, Foster said that in his experience supportive investors are supportive investors, whether they’re private equity or not.
“Private equity often gets bad press, but the things it gets bad press for I don’t really see happening with our industry, as the investors are keen to build and support good businesses and not strip assets or similar things,” Foster said. “I see private equity having similarities to private ownership with quick investment and growth decisions, compared to the longer term and sometimes slower progress of the larger public companies. But the difference is not huge; it’s very much about who you work with.”
When reflecting on the decision-making process at Arc, Foster shared that the team regularly discusses strategy and plans with investors, and that they are always supportive in the decisions while serving as a sounding board and guide.
“We have a small leadership team who review and plan the strategy and our big decisions, and then we have an equally small team to discuss with our investors,” Foster explained. “Private equity likes strong financial and data-led analysis, but that is a good discipline for any business, and we strive to be as quick and clear in our decision making as possible. What’s very important to me is to back the ideas of our leaders, as they’re the ones innovating and coming to us with how they can grow their businesses.”
Why It Matters
Foster said it is important for trade show industry professionals to understand “that a good and supportive investor is a good and supportive investor whoever they are, and the relationship with those investors as part of our team is clear. In all the private equity investor partners I have had, the personal relationships and support are almost more important than the financial and operational support. Then it is important to what works well for your company and personal objectives, culture and aims in terms of horizon and initiatives. The best piece of advice is to understand what you want to do then marry that up with their objectives and make sure you think of culture — people, purpose, the impact of brands on their communities — as well as money and profit.”
Check out the Trade Show Industry M&A Activity Update in the September edition of TSE magazine. If you have M&A news to share, please send information to Maddy Ryley (mryley@tradeshowexecutive.com) to be featured in the update.
