Steve Monnington, managing director, Mayfield Media Strategies talks over the last quarter's key exhibition M&A activity.
Over the last 12 months there have been few deals in China due to economic slowdown, a lack of decent sized businesses available and high price expectations from what few sellers there are. However, there is still a high level of interest for deals that make sense.
One business that almost all of the acquisitive international buyers have been chasing is the China Digital Entertainment Expo (known as ChinaJoy), China’s largest exhibition for the gaming sector, but the high price expectations of the owners have been a barrier. However Hangzhou Shunwang Technology Co have scooped the deal and will acquire 51 per cent for up to US$87m (575m RMB). Shunwang Technology is a Chinese quoted company providing entertainment software to internet cafes and is an exhibitor at ChinaJoy,
The initial payment of 350m RMB ($53m) represents a multiple of 27x 2015 EBIT which is more in line with an internet company valuation than the multiple range normally paid for exhibitions. Shunwang can afford to pay this as they are currently trading on a Price/Earning (PE) ratio of 81 and will raise up to 2bn RMB by placing new shares to fund this acquisition and other projects. At the time of the deal, Reed Elsevier’s PE ratio was 27 and UBM’s was 31. The question is whether the Alibaba/UBM tie up earlier this year, and now this deal, is the start of a trend of involvement in our sector by the tech companies.
There are around 12 privately owned businesses in China that would make attractive partners for international organisers and we (MMS) are handling the sale of four of these, and expecting more activity this year.
Meanwhile, there’s interesting times in the USA fashion sector. At the end of 2014, UBM acquired Magic as part of the Advanstar acquisition. Then, in August last year, Clarion acquired Womenswear in Nevada through US subsidiary, Urban Expositions. Now UBM has acquired Business Journals Inc, organiser of exhibitions for apparel in New York and Las Vegas including AccessoriesTheShow. About 15 per cent of the $40m revenue comes from publishing and websites. Acquisition price was $69m, around 10-11x EBIT which should reduce significantly given the cost economies of scale available as a result of moving the shows within Las Vegas alongside Magic.
