By Steve Monnington, managing director, Mayfield Media Strategies
The two questions I am asked most at the moment are – 1. Is M&A getting back to normal? and 2. What are the post-Covid multiples?
The answer to the first question is ‘No’. The reason why buyers put deals on hold back in March 2020 was because they had no idea how the pandemic would play out. They continued to be on hold through the last year because of the lack of visibility regarding when the next edition might take place, and this is still very much the case. The only exhibition market that has been trading consistently is China and we have seen deals continue to happen there.
In my last column I talked about the tie up between GL Events Greater China and Nexus Point. This month Reed, having been very quiet on the acquisition front, has announced a definitive agreement to acquire a majority stake in the China Hospital Construction Conference (CHCC) which runs in Shenzhen. This will be through their Reed Sinopharm joint venture.
Elsewhere it is definitely not business as normal and won’t be until it’s clear that exhibitions will actually take place. The slight change in sentiment in the UK over the Indian variant of Covid and what this might mean for final unequivocal lockdown release shows how fragile the current situation is. The much lower vaccine rates in the rest of Europe and the continuing restrictions on travel also add to the uncertainty.
Having said that, there has been a big spike in pre-sale activity and the team at Mayfield Towers is extremely busy. While some of the larger buyers remain muted, there are a lot of smaller acquisitive buyers who don’t want to miss out on potential deals – there is clearly quite a lot of money around right now. However, it’s a mixed situation when it comes to sellers. Those entrepreneurs who were on track to sell their businesses pre-Covid are gearing up again to sell and we are generally scheduling the process kick-off at the next edition of their main event.
Most of the organisers who haven’t decided to sell seem reticent when approached by buyers, preferring to keep their focus on making sure that they deliver a great show, which is understandable given that they have held onto significant amounts of their exhibitors’ cash for over a year.
All of this will mean a gradual start to M&A again.
There is not enough current data to answer the question about multiples as several of the recent transactions have been Covid related. Many buyers expect multiples to have dropped but entrepreneurs will not accept significant lower valuations, preferring to wait until they have built their business back to 2019 levels of profitability.
To counteract lower levels of 2021 profits, smart buyers are discussing extended earnouts so that the seller has the opportunity to get full value for the business if it gets back to normal levels of profitability.
Among all this uncertainty, one thing is for sure: private equity appetite for the sector will continue and PE firms don’t seem to have been put off by the trading issues of the last 15 months. In fact, a new PE/entrepreneur relationship has been announced with New York-based private equity firm EagleTree Capital backing a buy and build exhibition strategy led by Simon Foster, formerly with UBM and Comexposium. EagleTree already has experience in the sector with an existing investment in Northstar Travel Group and a previous investment in Penton. This adds another buyer to the mix, although with no transactions announced, we don’t yet know about their aspirations regarding geography, sectors and size.
