CHICAGO — Mergers and acquisitions activity has increased in the trade show and exhibition industry since the pandemic, with outside investors coming in and consolidation across the sector.
To better understand M&A trends and the investment and financing landscape, Trade Fair Manager spoke to Arc Group CEO Simon Foster and Terrapinn CEO Greg Hitchen about the rise of private equity in the exhibition and events sector.
Terrapinn is now one of the largest private event organizers, and Arc is backed by investment funds managed by EagleTree Capital.
Identified trends
Both Foster and Hitchen said the sector was attractive to private equity in financial and growth terms.
“The trade show space is very popular with private equity firms,” Hitchen said. “And that love affair has been going on for a while. Private equity firms love cash-generating real estate, and there’s a good secondary market.”
Hitchen said that of the world’s largest organizers, more than half are owned by private equity funds. “Six years ago, that wouldn’t have been the case. Private equity funds are increasingly present in the trade show sector.”
Simon also agreed that the sector is financially attractive for private equity, particularly in the US currently.
“Despite consolidation, our market remains relatively fragmented with many new entrants coming in all the time,” Foster said. “I think in recent years the US market has come back to the top in terms of opportunity and concentration, after China and South East Asia had previously competed for that position. Clearly the Middle East and Saudi Arabia in particular are also seeing strong growth, but the scale of the US market means it remains the key market.”
Reinforcing the US appeal, Hitchen said he was interested in developing a much larger footprint in the country for Terrapinn.
Foster also said he has noticed that companies that were previously considered key buyers are now preparing to sell. He also noted some tension in the market, with companies waiting and watching, which is slowing down transactions and raising more questions about them.
“In short, I would say the key trends are that there are more buyers in the sector, which is increasing interest and potential deal volume, and potentially pricing,” Foster said. “Obviously the ‘COVID pause’ disrupted that trend, but it’s now back. I also think it means there are more types and scales of buyers, which is giving a wider range of event business types and sizes more opportunities to sell/invest. I think this is an interesting and critical point for us as an industry, because event businesses have never been homogenous, but now there is even more variety of businesses and models. So I think this is a key trend, as investors are more open-minded and interested in ‘new’ models.”
Advantages of the different models
When it comes to private ownership, Hitchen said that while there is generally less capital and fewer opportunities for major acquisitions, there is no shortage of entrepreneurial energy.
“The advantage of being a private company is that at a certain scale you can take more risks. I think you can get closer to your markets and the company can grow more organically or naturally,” Hitchen said. “Of course, there’s the advantage of having control over your destiny and I also think you have to be more creative. Trade show companies or media companies need a creative core.”
Hitchen also shared his views on the benefits of being privately owned, including access to significantly more capital, the ability to generate faster growth and make larger acquisitions.
“The downsides (of private equity ownership) are that the organizers are controlled by people outside the media and there is 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 beneficial financially or otherwise in the medium to long term.”
When asked what he saw as the pros and cons of private equity holdings, Foster said that in his experience, supportive investors are supportive investors, whether they are private equity or not.
“Private equity often gets a bad rap, but I don’t really see that happening in our industry because investors are interested in building and supporting good companies, not tearing down assets or things like that,” Foster said. “I see similarities between private equity and private equity, with rapid investment and growth decisions, versus the longer-term and sometimes slower progress of large public companies. But it’s not a huge difference; it all depends on who you work with.”
Reflecting on the decision-making process at Arc, Foster shared that the team regularly discusses strategy and plans with investors, and they always support decisions while serving as a sounding board and guide.
“We have a small management team that looks at and plans strategy and our big decisions, and then we have an equally small team that talks to our investors,” Foster says. “Private equity likes solid, data-driven financial analysis, but it’s a good discipline for any business, and we try to be as fast and clear as possible in our decision-making. What’s really important to me is supporting the ideas of our leaders, because they’re the ones who are innovating and coming to us with how they can grow their businesses.”
Why is this important?
Foster said it’s important for trade show professionals to understand “that a good investor who supports the company is a good investor who supports the company, whoever they are, and the relationship with those investors as part of our team is clear. With every private equity partner I’ve had, the personal relationships and support are almost more important than the financial and operational support. Then it’s important to know what works well for your company and your personal goals, your culture and your goals in terms of your horizon and your initiatives. The best advice is to understand what you want to do and then tie that to their goals and make sure you’re thinking about the culture (the people, the purpose, the impact of the brands on their communities) as well as the money and the profit.”
Check out the trade show industry M&A activity update in the September issue of TSE Magazine. If you have any M&A news to share, please send it to Maddy Ryley (mryley@tradeshowexecutive.com) to be presented in the update.