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Reed Exhibitions buys Mack Brooks

Reed Exhibitions is buying the high-rated, UK-based Mack Brooks for a price believed to be some £200m.

The privately-owned Brooks was established in 1965 and holds more than 30 business-to-business events in 14 countries, across airport technology, chemicals, packaging, and fasteners. The company, whose major brands include Euro Blech, InPrint, RailTex, FastenerFair, InterAirport and ChemSpec, has long been one of the UK’s most admired independent exhibition organisers.

One flagship is the Fastener Fair, taking place at Stuttgart in March, which will have a total of 22,000 net sq m of exhibition space occupied by 900 companies from 40 countries. It is said to be almost 10% larger than the previous event in 2017.

Owner Stephen Brooks has spent half a lifetime fending off bids from larger rivals. In 2016-17, Mack Brooks made operating profit of £16.7m on revenue of £38.5m (a 43% margin). It’s a solidly international business: some 92% of revenues come from outside the UK, with profitable operations in the US, China, Singapore, India, France, and Germany. Even its complementary publishing is soundly profitable.

Mack Brooks is a gem of a business and there are several disappointed exhibitions bosses who had thought they were on some kind of a long-term promise whenever the owner decided to sell. But he could only sell to one of them. Reed actually pipped Inflexion private equity (former 47% owner of UK-based CloserStill) to the deal.

The big news is certainly that the RELX parent decided to invest some £200m in an acquisition on behalf of Reed Exhibitions which – while very strong and growing – is strategically non-core in a listed global company focused on information and data-tech. No matter. It’s petty cash for the £32bn RELX and will, anyway, make the world’s second largest exhibitions group yet more attractive when/if the sale (which RELX executives have discussed) finally materialises. But not yet.

With its network of 30 international offices, Reed will quickly boost profits by absorbing the Brooks local operations. The price of the deal is eye-catching. The Mack Brooks strong portfolio of non-annual shows means that its operating profit has swung alternately in the last four years between £2m and £20m. Its complex corporate structure, international subsidiaries and joint ventures make tricky reading but, at one level, the profits of those four years have averaged £13m. So, the estimated £200m purchase price could be 15-16 x the average EBITDA.

While stated acquisition prices can be distorted by debt and liabilities, the Mack Brooks deal seems unlikely to be quite as rich as the reported 20-22x multiple paid for Phil Soar’s CloserStill by Providence private equity. That’s some sort of consolation for Inflexion which had so wanted to replace its CloserStill investment with Mack Brooks. But imagine what any of these prices – and the appetite of private equity – could mean for an eventual sale of Reed Exhibitions, with its £300m operating profit from 500 events in 30 countries. Do the maths.