Who is in the tank?

The main take-away of the recent CEO Exhibition Forum in Shanghai was a statement made by our good old friend Paul Woodward: We are living in good economic times!

Yes Paul is absolutely right - indeed we are. For a few years now global exhibition industry is enjoying wonderful growth. Just this month Messe Duesseldorf announced record breaking net income of more than 50 million Euro thanks also to seasonal affects for their shows.

However looking deeper you can also find that many public listed companies have enjoyed a fabulous performance in the past 365 days:

• RELX +40%
• UBM +28%
• MCH+25%
• Tarsus +25%
• DMGT +20%
• Informa +20%
• ITE +19%
• Fiera Milano +15%
• Emerald with +20% just in 4 weeks after listing ….

and GlobalSources with more than 250% just after the announcement of a possible take-over.

On average you could achieved 25% if you bet on MICE nice return isn't it? But whats behind? Where is the public money going?

Well we had seen massive increase of M&A activities within the last 18 months. The big kick off was UBM with Advandstar and later AllWorld costing them a combined amount of 1.5Bn USD. Informa paid up more than 1Bn USD for Penton Group and several smaller acquisitions in China. Tarsus was very active in Asia as well and properly spent 30 millions and recently GlobalSources was valued for 500 million by private equity. Adding up the numbers we see transaction amounts of roughly 4Bn USD within just 24 months. 4 billion USD is equal to the market capitulation of the Zimbabwe stock market or roughly the entire market capitalization of UBM.

I think all of us might feel the same - this is just the beginning. And we question ourselves where are we heading to? Who is in the tank?

I believe exhibition industry will undergo a massive transformation within the coming decade. Not only will many private and family owned businesses disappear but we will also see a massive growth spiral for the bigger players. The TOP 7 might be sharing 65% of the global exhibition market by 2025 and the gap between the first TOP 7 and the rest will be at lease more then 300 million revenue. Growth attracts growth!

But growth also attracts newcomers, outsiders and enviers. We have already witnessed that private equity started to get very active on the AllWorld deals and Global Sources deals or owning companies like Comexposium, Clarion and previously Emerald. This means exhibition industry (although relatively small in scale) has made it to the top agendas of global acting private equity companies. Reasons are relatively simple: organic growth in MICE outgrows many other industries, attractive multipliers and ROI upon listing or successful expansion or integration.

UBM only bid on “bolt growth targets” and not on cost synergies based on their Asia CEO Jime Essink. “Boltness" is what private equity and many public listed companies have now in their eyes and minds looking at the remaining cakes of the global exhibition market. That is the kick-off of a shark tank never been seen before in history of the exhibition industry. Within the next few years the question will you exist or will you be hunted down … Will you have your existence permits or will your borders be smashed by neighbors… Its like in a war game or in a fish tank. Put a few big ones and many smaller ones inside guess you will survive? And very likely new big fish will jump into the pond from other ponds … Chinese capital is waiting for outbound investment, PE from all over the world have more and more appetite. So properly the TOP 7 by 2025 might be completely different then today. Only 2 or 3 names of the list will survive and the rest might be completely newly formed companies or Chinese companies that you never heard before. Every day could bring us a new exhibition organizer - and most likely not on a smaller scale - a new bigger competitor.

Of course a few government managed companies will survive the battle but it will also put them under tremendous pressure if public and private equity cash fights on all ends of the globe. Will the Germans be able to expand globally and withstand this massive competition? Will CCPIT, TAITRA, HKDTC and DITP continue their shows in spite of growing competition from bigger and bigger peer shows next door? I would predict they continue to exist but are forced into more private led partnerships for survival. The German business model will eventually evolve. Some smaller exhibition cities with government managed venues and organizers might be out of funds and look to sell their silver to some Chinese or PE investors…. Who knows!?

Listing and delisting - selling and buying will be the key words in the coming years. We only entered the first phase to what many industries like pharmaceutical, agriculture or other core industries have seen before - a massive consolidation.

I believe it will be disruptive to our industry - it will definitely be disturbing but it will also help us to grow to the next level and to evolve our products beyond just capital. This market consolidation will be a great opportunity for all organizers to find their “elixir of live”. Having served this industry for 20 years now I am excited to be in this time and so should you. Just keep watching the market (… and your back) and don't be surprised!

Happy Summer Holidays

Bjoern

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