New York – The red hot m&a market simmered a little on December 8th when the news began to leak that Advanstar Communications, the fourth largest trade show organizer in the U. S., decided not to sell. Official word came on Friday the ninth. The privately held corporation, owned by DLJ Merchant Banking Partners/Credit Suisse Boston, came on the market in early July.
Joe Loggia, President and CEO of Advanstar, commented, “While we received a high level of interest from a number of parties pursuing a potential acquisition of Advanstar, we believe the best choice for Advanstar and our shareholders is to continue to execute our current strategy. Our market- driven approach, along with the successful restructuring we completed earlier in the year, has enabled us to make substantial progress in both accelerating the growth of the company and transforming our business.”
Adam Gross, VP of marketing and communications for media M&A specialist Jordan, Edmiston Group Inc. (JEGI), said Advanstar’s abrupt retreat from seeking a buyer was not an indication of a cool-down of the M&A market.“ Our pipeline is robust and we have no indication that pace will slow down,” he said.
Private equity firms have driven much of the increase in M&A activity for interactive companies this year. The flurry of activity reached $10.6 billion in the first three quarters of the year, up from $4.4 billion in the same period in 2004.
Gross said the most typical reason for companies to take themselves off the market is price. “It’s certainly not the first time a company has done this,” he said.
In 2001, Thomson Media opted to put off a sale, choosing instead to sell smaller parts of the company — something Advanstar already has done, to Questex (see timeline below) . Three years later, Thomson sold to global investment firm Investcorp for $350 million — 40% more than its value in 2001.
Gross said private equity firms typically have to work within a specific financial structure for a deal to make sense. Advanstar owner DLJ Merchant Banking Partners/Credit Suisse Boston was said to be asking between $950 million and $1 billion for the company. DLJ purchased the company for $900 million in 2000. Its current debt load hovers around $633 million, according to financial statements.
“There may have been some feeling that they couldn’t make it work,” Gross said.
Advanstar Communications is the fifth largest B-2-B trade publisher in the U.S. with 58 publications and is the fourth largest trade show operator in the country. Advanstar generated approximately $275 million in 2004 revenue adjusted for the April 2005 sale of several clusters to Questex. Originally part of Harcourt Brace Jovanovich Inc. (HBJ), the company was sold to Edgell Communications in 1987.
1991—rescued from near bankruptcy by Goldman, Sachs & Co.; changed name to Advanstar Communications
1995—put up for auction by Goldman, Sachs
1996—San Francisco-based investment firm Hellman & Friedman beat out competitors and bought the firm for $237 million. Owned 100% of equity, with management team having direct investments and share options. Advanstar became part of Hellman & Friedman Capital Partners III. Bob Krakoff joined Advanstar after retiring from Reed, part of British-Dutch Reed Elsevier. Hellman & Friedman created Advanstar Holdings based in Boston as an umbrella company for Advanstar Communications in order to allow for acquisitions that weren’t a natural fit for a B-2-B communications company.
1997—acquired Premier Hotels Resorts and Hospitality Resources Worldwide and launched Cosmetic Surgery Times, bringing total of titles to 57.
1998—acquired MAGIC International, world’s premier apparel marketplace headed by president Joe Loggia, significantly increasing the proportion of revenue from trade shows.
2000—Hellman & Friedman Capital Partners sold Advanstar to merchant banking affiliate of Donaldson, Lufkin & Jenrette (DLJ), Credit Suisse First Boston, for $900 million.
Between 1996 and 2004, Advanstar completed 35 acquisitions and joint ventures.
2003—Acquired Thomson medical publications and conferences for $135 million.
2004—Joe Loggia named president and CEO of Advanstar; Bob Krakoff retained position of chairman. Krakoff retired from that position July 31, but remained one of the largest investors in the firm.
Company launched Luxury Travel Show in New York, capitalizing on success of Las Vegas show; also launched off-road publications. Also sold art properties, and joint venture in France and German trade show business.
2005—Began restructuring early in year. In April, sold off Information Technology & Communications, Travel & Hospitality, Beauty, Home Entertainment, and Abilities and Portfolio groups for $185 million in cash to Questex Media Group, a new company founded by Kerry Gumas, former VP and general manager of Advanstar’s Information Technology & Communications Group and Tom Caridi, former CFO for Reed, with the investment firm Audax Group. The portfolio generated about $100 million in revenue in 2004 for Advanstar, nearly one fourth of the firm’s total 2004 revenues.
In July, the New York Post said Credit Suisse First Boston had put Advanstar’s remaining units up for auction, including its Fashion/License, Power Sports/Automotive and Life Sciences (Healthcare, Science and Pharmaceutical) groups, which generated approximately $275 million in 2004. While president Joe Loggia at the time conceded that Advanstar’s recent financial performance had generated interest in the company within the investment community, he would not comment on further details. Suiters included Bob Krakoff, former Advanstar Chairman and CEO, backed by The Blackstone Group; others included ABRY Partners, Warburg Pincus, Apprise Media, Ascend Media, and Providence Equity/Citicorp Venture Capital. Since that time, ABRY has been embroiled in a lawsuit over the $500 million acquisition of F+W Publications in August, lessening the likelihood it would pursue Advanstar.
Over the summer, Advanstar acquired the Michigan Motorcycle Show and Motorama events from TBJ Productions; Project Trade Show group, a series of trade events that serves the premium contemporary sector of the fashion market, in August ; POOL, a boutique lifestyle trade show , also in August; and Off Road Expo from Petersen Events Corporation in September. The company launched four new conferences in Q3, including three pharmaceutical conferences and a licensing conference.
Third quarter 2005 results showed revenue from continuing operations up 9.9% to $85.7 million from $78 million in the same period for 2004. Year-to-date revenue for the first nine months of 2005 increased 5.7% to $232.3 million from $219.7 million in the same period last year. Advanstar is carrying $633 million in debt and will pay approximately $70 million per year in debt service this year. Cash flow is sufficient to cover the debt service —– EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) from continuing operations in the first nine months (only) of 2005 was $68.4 million – a 2.4% increase.