When Daily Mail owner DMGT announced it was looking to sell its US business George Little Management, a B2B events division comprising 15 trade shows in the fashion and home furnishings industries, it raised eyebrows on both sides of the Atlantic.
This was not because George Little accounts for just under half of total earnings for DMG Events, a group responsible for two-thirds of DMGT’s total revenue. Nor was it due to the fact that the US$240m (£149.1m)sale includes the flagship New York International Gift Fair. DMGT has been unswerving in its divestment of exhibitions at home and overseas, offloading events faster than Formula 1 driver Lewis Hamilton loses fans.
Instead it has something to do with DMGT chief exec Martin Morgan’s May disclosure that his company is looking to exit businesses without growth prospects. It’s a sentiment echoed when the company, forced to comment on media speculation, stated: “The strategic review of GLM follows the conclusion that there is limited opportunity to leverage the GLM assets across the wider DMGT group” and will focus its events into fewer areas, notably its energy shows and operations in the Middle East such as Adipec and Gastech.
Rather than placing a bow around George Little’s gift shows, Morgan’s statement landed it firmly on the block with its belly exposed.
The gift show sector is not in growth, and the $240m wholesale asking price for George Little – admittedly the loftiest prediction of DMGT’s potential gain from the sale – is high. George Little may be one of North America’s larger B2C organisers, but consumer events suffered significantly more than B2B events in the downturn.
Rumour has it DMGT has already been forced to rein its multiplier in to eight from 10, a figure that assumed the company is good for a US$24m annual return. DMGT originally acquired a stake in the business back in 2000, snapping up the remainder for US$155m in 2007.
DMG Events revenues passed £81m and operating profit reached £29m for the six months ending 3 April 2011, up 40 per cent and 66 per cent respectively. This is a marked improvement on figures from 2009 to 2010, during which DMG Events revenues fell by more than £110m, or 37 per cent.
The very fact we know about this deal before any ink has dried is that there are no obvious buyers. The New York-based Jordan Edmiston group, brought in to advise on the sale, has been in talks with several potential buyers without any immediate takers, and subsequently lips have set to flapping.
Commenting on potential suitors, Mayfield Media MD Steve Monnington said it was hard to see who out of the trade buyers will be tempted. “UBM and Informa have deep enough pockets but neither is in the gift show business. At this price level Clarion is doubtful and while it can be argued Diversified shares some portfolio profile with George Little, it’s a small player and would need substantial financial backing.
“Which leaves two potential candidates: Reed and the US organiser Nielsen, a home-market buyer that already owns the giant trade merchandise and gift show AMD.”
But the fact remains, who will buy a business that offers, in the owner’s words, ‘no growth potential’? It’s far more likely we’ll see little George swooped on by a private equity company. But private equity will also be cautious given the recent track record in the US. Significant cost-cutting and the closure of less profitable events could mean the business makes more financial sense for a re-sale in the future.
Any comments? Email exhibitionworld@mashmedia.net
