Industry consolidation - a roller coaster?

Bjoern Kempe, CEO of ExposAsia, casts an inquisitive eye over the recent major business moves in the exhibitions industry.

 

Whoever heard me speaking at various conferences throughout 2018, would know I kept repeating advice to look out on the stock listed exhibition companies. I like to think I was reading the runes correctly.

GL Events – stocklisted in France – spent more than US$100m in China for various shows. I am not so sure whether the shareholders really like joint ventures with partly state-owned companies, or at least state-owned background companies. However, the stocks are not doing too badly, trading currently around US$23.

Reed acquired Mack Brooks in a US$250m+ deal. RELX stocks have reached a historic peak, despite stock markets around the world generally falling over the past four months. 

Since RELX stocks reached a peak, I do believe that it’s an excellent time to split Reed from RELX or to find another stocklisted company that is ready for a premium stock swap under RELX.

On the contrary – stocklisted companies are no longer safe from being delisted. The recent US$700m Tarsus acquisition by CharterHouse illustrates that Private Equity can take the brave step and make offers for listed companies at any time. Interestingly, on that day the deal was announced ITE stocks jumped 10% - did we miss something here?

I think the confidence jump for ITE stocks reflected the hope of shareholders or potential investors for a similar offer from a private equity house fairly soon for the long suffering ITE stocks.

Although ITE has taken on Ascential, they are not ready to play the global ball game and I do expect that something will happen to ITE this year. 

We now ask, what is left? Well DMG and easyfairs are still in the market – not sure if they will use the momentum of 2019 to sell out or to merge with someone. The same applies for MCH – the share plunged to a historic low of 17CHF from a 80CHF high more than year back. The only rescue might be a private equity house or another big player and reward the cantons that still own a bit of MCH with a nice upside on this current stock price.

I must emphasise that most of my findings are again speculations and I don’t encourage anyone to follow my advice or purchase stock on the back of it. 

We can expect the consolidation to continue not only for the Top 5 of our industry but also for the companies that are between US$50– 100m turnovers. I do expect a Roller Coaster from ups and downs that will last until 2023/24 when we properly reach the final stage of our industry consolidation by Blackstone, Providence, Charterhouse and MidWest all wanting their investments to be paid up. 

What will remain? A Top 5 that will have a combined revenue of an estimated US$7.3bn. The German Messe companies will reach combined US$3bn and PE owned companies will have revenues in hand of more than US$2.6bn.

Moving slightly away from the financial playground, I have been touring in the last months through Asia and I have witnessed that not only are the top companies consolidating but also the family businesses are shaken by what is happening in our industry.

In a previous column in EW I wrote how important private and family organisers are as driving force in our industry, as incubators, as risk-takers and as fast-moving indicators of where the business is. After visiting almost every Asian country in the last six months, seven out of 10 private owners are telling me that they are ready to sell and move on outside of the exhibition industry.

Some of the very old established companies in each country that have existed for more than 20 years feel anxious about what is happening now. They don’t have one or two enemies anymore, they find themselves having unknown enemies.

Nobody knew that Tarsus would change ownership or MackBrooks and many new organisers such as EJK, InfoComm, Messe Stuttgart etc are entering new countries such as Thailand. 

Deutsche Messe has recently acquired IFMAC in Indonesia and finally have their own show.

Other German and foreign organisers will continue to enter South East Asia on the urge of quickly strengthening their portfolio and verticals and to balance international revenues with ones from their homelands.

So, from the private and family owned businesses in India, ASEAN and China we can see the same roller coaster ride of ups and downs and more consolidations and sell-offs going on. 

Before the end of the year I expect a significant rise in transactions of companies between US$500,000 – $2m.

And we haven’t even mentioned China, which abounds with massive free market tradeshow assets.

A few big players have several shows on the hook and we will hear much acquisition news from China this year, I am convinced. 

GL opened the table game in late 2018 announcing CEIC and Shenzhen Fashion. Beside GL many global players have put their eyes back on China after the acquisition market was quiet for three years and we see a strong rise in prospective selling companies.

The good thing about China tis hat the private owned businesses very often also come with great EBITA and volume beyond US$2 or US$3m. 

Industry will also consolidate here and its more about who is the fastest and can attract the bigger fish in the Chinese market. 

I’m not sure if the other big players will also easily spent more than US$100m like GL, but with full pockets at RELX, Informa Markets, DMG, Blackstone, Comexposiums new shareholders, Tarsus new shareholders and GL – Chinese private owners have also spotted the opportunity to let go.

At the same time it also opens up a unique opportunity for a Chinese global player to form and eventually play in the premier league in future. 

We are yet to see the results of the Chinese market consolidation and my personal estimation is that this year more than US$500m will be paid for various private shows in the Chinese market.

With so many things happening in our industry we need to buckle up just like in a real roller coaster ride and see what comes behind the next peak of the coaster trail. I wish all of you an exciting 3rd and 4th quarter of 2019 and Expos Asia teams in China & South East Asia stand ready to help you to achieve your annual goals!

 

Bjoern Kempe is CEO of ExposAsia.

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