Mayfield Media’s Steve Monnington looks at how acquisitions are providing the gateway to business in emerging markets.
The modus operandi for companies entering new markets is to acquire a majority stake in a local organiser and use them as the base for future development in that market – in other words, a “hub partner”. Many of these businesses are family firms and following the acquisition, have to adjust to becoming part of an international group.
For the purchaser, it is important the inevitable shift in culture doesn’t destroy the entrepreneurial approach that made the firm an acquisition target in the first place. Integrating a hub partner adds another dimension as the acquirer looks to launch its own brands through the partnership.
Tarsus acquired IFO last year as its first step into Turkey. “We were looking for a major organiser to be our platform business,” Tarsus MD Douglas Emslie said.
“We wanted a multi-product company large enough to handle the launch of our own brands plus bolt-on acquisitions.”
IFO’s recycling, elevator and sign shows fitted the bill. “Turkey is an industrial market and IFO targets steady industrial sectors as do we with our label machinery shows,” Emslie said. “It has 20 years of in-depth and long-term relationships.”
IFO was a family company owned by Selahattin Durak and one of the longest established organisers in Turkey. “In recent years the exhibition market in Turkey has changed with new international players coming to the market and this also affected the level of potential competition,” explained Durak. “I also wanted to plan for my retirement.”
Due diligence for the acquisition of a hub partner goes beyond the immediate business being acquired and includes the wider strategic plans for the purchaser. “We had to justify to our investors why we wanted to invest in Turkey, so we created a roadmap for the next three years, including identification of the sectors and potential acquisitions we wanted to add on,” Emslie continued.
Following the purchase, Tarsus started working on the base business immediately to add value with more international buyers and exhibitors. “Then we looked at the wider development of new launch ideas,” he said.
One of the key challenges of the integration process is getting buy-in from the local partner. “Our style is not to change the management so we allocated one of our people, Andrew Furness, based in London to oversee the business,” said Emslie. “We engaged directly with the next tier of management as well as Mr Durak and this was crucial in getting acceptance of our ideas.”
This approach was well received by IFO. “To work for a well-known international company has encouraged our staff in their work,” Durak said. “They were afraid the team would be changed or that I would leave but neither of these things have happened so they feel good and they trust Tarsus.”
One trend I hear about regularly is that, after the acquisition, the local partner sits back and expects the acquirer to drive all development work. Emslie firmly believes in a two-way process, as local partners carry the market knowledge. “I have been impressed IFO has done a lot of competitive analysis for all of the launch ideas and always produced an objective SWOT [strengths, weaknesses, opportunities and threats] analysis rather than reasons to say no,” he said.
Venue challenges
There are always challenges with acquisition integration and in this case the venue, Tuyap, was a partner Tarsus had to tread carefully with.
“When you have a venue who is also an organiser there will always be an issue of whether your new niche launch ideas overlap with any of its existing shows and this has slowed down the decision-making process,” said Emslie. Durak agreed the venue relationship was his biggest concern. “However it’s good to see our 20-year old friendship and commercial contact has not been affected at all,” he said.
Emslie summed up Tarsus’ success with the following first-year school report: “Better quality products and team than expected. Twenty per cent growth in the first year, the launch of a second Asansor [Elevator] show in Izmir and a healthy pipeline of both launches and acquisitions.”
Durak is also happy. “From the beginning, the 50/13 strategy [whereby Tarsus aims to derive 50 per cent of revenue from emerging markets by 2013] was clever and bright. Further development of this theme into 2015 and the success of the overall business means I am reconsidering retiring in 2013.”
Any comments? Email exhibitionworld@mashmedia.net
