Building a Sale Ready Events Business

In the Media Acquisition Report: M&A Outlook 2022-24, and at our recent roundtable event we spoke to active trade and private equity (PE) buyers about how they’ve evolved their M&A strategy, and their criteria for investment.

There is optimism around the return and role of trade shows, and we’ve seen strong attendance and onsite rebook rates in Q4. However, there is a large amount of uncertainty about the return to in-person formats for events which are largely dependent on international visitors and travel.

The 1-2-1 model is attractive, and is forming part of many ‘evolved events’ propositions. This model focuses on fewer, high quality and more meaningful meetings as opposed to generating the largest attendee number.

The importance of content as a tool for engaging audiences year-round, even if not directly monetised, has made the conference model attractive. A digitally native and content-led proposition enables deeper engagement with communities, and builds valuable data and audience insight. This unlocks additional value for media owners.

Buyers are therefore seeking targets who support their objectives around enhancing the value of community propositions. Data strategy and capabilities are a strategic priority for many of the respondents who are seeking to add value to existing products as well as develop new, data driven approaches to serving customers

Marketing Services as a category is increasingly attractive due to the higher quality of earnings achievable. Recurring revenue from annual campaigns and increased Average Order Value (AOV), and Customer Lifetime Value (CLV) are both desirable characteristics, and build resilience. Events as part of an overarching Marketing Services offering, is increasingly attractive to buyers – more on Marketing Services here.

To become more attractive to buyers, events businesses need to be able to minimise risk and capitalise on the opportunity for year round revenue.

Number one on a buyers’ checklist is resilience. A larger amount of scrutiny is placed on how robust a business proved to be during the pandemic and is a key consideration during diligence.

Buyers are seeking to go deeper into their existing markets, thus acquiring businesses which either extend their reach, or increase capabilities and share of wallet – both being important factors.

The strength of a business’ management team is important, as is the quality of reporting and governance. Buyers want to see strong processes, and understand a target’s operating model and ‘secret sauce’, in its ability to continue to achieve results.

ESG is becoming a much bigger factor in decision making, especially for PE backed corporates, who’s LP base is increasingly aware of ESG and impact investing. It’s now discussed as part of due diligence for some buyers, to ensure acquisitions don’t hinder their own objectives and milestones.

There are a number of value drivers which will affect multiples, including to what degree a business can demonstrate; Market Leadership, Strong Quality of Earnings, Innovation and Product Management, Strength of Team and Governance, and Scale, Volatility, and Growth.

When interviewing buyers, the average range for a tradeshow business was 6-7x for businesses in the £1-3m range, and 10x for those at Platform scale (£3m). Conferences were in the same range. Marketing Services averaged 6-8x, again with the ability to get to 10x+ at Platform scale.

A clear primary business model is important. Buyers want to be able to put a business into a specific bucket when it comes to determining value. Multiple arbitrage can be a negative for a  business operating across different models. A note from one buyer who has divested a part of the business to reduce this impact and retain higher multiple arbitrage.

Being number one or two in a market is an important factor for a buyer, as is market-headroom. The question buyers ask is how much can the business grow in its current market, or will it need to seek new markets and products to achieve double digit growth.

Scaled events are important as it demonstrates a business’ ability to take a large share of wallet, drive organic growth, and further supports higher margins and quality of earnings. Having the number one or two event in a market also improves resilience.

Most entrepreneurs fall into the trap of realising the value they should have created, the products they should have invested more in, and the people they needed to hire and keep, through the perspective of hindsight – and this leaves substantial value on the table when they make the final decision that now is the right time to sell.

Questions to ask yourself ahead of a sale:

• Do you have a strong succession plan, or is the business still heavily reliant on you?
• How robust is your 3 year plan? Would it stand up to scrutiny from a buyer through due diligence?
• What are the resource requirements to be able to achieve the 3 year plan?
• Are your growth drivers reliant on lots of new product launches, or from maximising your core?
• Is your reporting and governance strong?
• Who are the preferred buyers for the business, and what are the specific synergies for each?

During Commercial Due Diligence, buyers are looking to gain comfort around:

• Clarity in your growth story and value proposition
• How much market headroom is there, and ability to penetrate?
• How do you serve the market better than others? What’s your differentiator, and what drives that?
• Demonstration of recurring revenues and retention – repeatable, predictable revenue
• What’s the achievable growth of the business? You need to be able to model, clearly describe and defend a realistic forecast and business plan.

Since the Covid-19 pandemic there is a greater emphasis from buyers on how the business operates – what drives it? Who is key? Buyers have woken up to the importance of people and talent in the process and in creating stability. It’s so important to get buy-in early – create an integration plan in advance and communicate it to the team.

Considering your culture is also key – what are the little things that people want to hold on to? What motivates your team?

“It’s usually a people issue when an acquisition fails”.

Integration is more on sellers’ minds. Buyers are realising that it gives them a competitive advantage if they can prove they look after the businesses they buy. There is huge variety amongst buyers in the approach they take to integration.

Developing a robust 3 year plan means a seller is able to objectively understand what additional value could be created through a sale process. There are a number of steps to take for a seller before initiating a sale process, but this is a good starting point.

For more information on preparing for sale, and how to maximise value through a sale process, see our Exit Hacks briefing paper. And for more tips on how to scale your business for maximum value creation take a look at The Scaleup Toolkit.