B2B exhibitions or trade shows have been the best performing traditional media sector for the last 20 years. The $30bn industry has thrived as an antidote to the online world, for professional and business people everywhere. Annual revenue has been growing at an average of 6% but has been higher still in China, India, Indonesia and Japan. Even in the mature markets of the USA and Europe, exhibition sales growth has been outstripping GDP.
Last year, some 70% of trade show organisers reported increased profits (source: UFI). The expansion, powered by the growth of new venues especially across Asia, has fuelled a long-running M&A boom. In 2018, the UK’s Informa usurped longterm leader Reed Exhibitions to became the world’s largest organiser, with the £3.8bn acquisition of UBM which had itself been on a trade show buying spree.
£7bn shopping spree
Over the last three years, some £7bn has been spent on acquisitions involving Informa, Clarion, Hyve, Reed, Ascential, CloserStill, Penwell, NEC, and Comexposium.
The industry is often said to have started with London’s Great Exhibition in 1851. But the global market for B2B exhibitions – once largely owned by non-profit trade associations – all but started in the US, in 1970. That was the year B2B magazine publisher Cahners acquired expo owner Charles Snitow, and described trade shows as “effectively the same business model as magazines, just in 3D—face-to-face.”
The Boston-based company expanded strongly by buying up a whole swathe of exhibitions in diverse sectors. The company, which had become the first broad-based exhibition organiser in the US, made acquisitions across Europe and Asia. It then merged with Industrial & Trade Fairs, a UK-based organiser started by the Financial Times and what is now RELX, which had itself acquired Cahners. That was the start of a 50-year trade show boom across the world.
But then came Covid-19.
More than 2,000 exhibitions have now been postponed or cancelled as a result of the virus outbreak. Although some 82% of the shows are said to have been postponed, it is believed that up to 50% of those will ultimately be cancelled. Some 40% of all impacted events are in Germany, US, China or France. But Germany alone, with 12% of postponements and 16% of cancellations, has been worst hit with a total of 340 shows so far impacted.
The largest markets, China and the US (whose exhibitions are largely domestic) may rebound. But third place Germany (mainly international) may struggle to recover.
Exhibition companies (like everyone else) are trying to separate the short-term impact from the long-term implications. But the sheer level of cancellations and Covid travel restrictions will reduce the scale and profitability of some exhibitions especially those targeting international audiences.
Events Intelligence predicts that the impact will be exacebated by corporates which, while seeking to simplify their global supply chains, will be more interested in domestic exhibitors. But international companies have typically provided some 30% of exhibition space and more than 20% of visitors. Since larger shows tend to attract more international business and to be more profitable, a reduction in global activity may disproportionately reduce profitability. There may be further damage from reduced trade show funding from government trade bodies.
The restrictions on travel and large events are likely to be only gradually unwound around the world. But what may be more worrying is the follow-on recession in many countries. Recent analysis showed that, a full three years after the last recession in 2008, some 37-42% of the surviving trade shows were 20% smaller and only 13-15% were 20% or more larger. The analysis shows that the exhibitions fallout from any recession tends to be delayed and that 2022 is likely to be the worst year.
Nightmare for investors
It’s a nightmare and investors are still reeling from the sudden change in the profit and prospects of companies that have been as good as gold for decades. Informa’s London stockmarket investors were taken by surprise by the size of a £1bn rights issue to increase the company’s liquidity. They paid up but the share price has about halved in the last six months.
The smaller Hyve (formerly ITE) had a deeply discounted “rescue rights issue” and its shares have lost more than 80% in the last six months. Its £100m market cap is now just one-third of what it paid for the retail shows it acquired from Ascential in 2019. In the US, Emerald’s share price has also lost 80% in the past six months.
Private equity has been burned too. It is exactly a year since Charterhouse paid £561m for Tarsus Group which was 17 x EBITDA. That multiple may even have been beaten by Providence’s £340m acquisition of CloserStill six months earlier. Three years ago, Blackstone paid £565m (40 x operating profit and 4 x revenue) for Clarion Events, which is now the world no.4.
In 2018, Informa had paid some 13 x operating profit for UBM, a similar multiple to that paid by Reed for Mack Brooks last year.
Once the fog clears, the M&A will begin again – but at post-Covid prices. The £1.3bn-revenue Reed Exhibitions might now be considered a more likely divestment candidate by its information services parent RELX – but for much less than the £4-5bn it may once have been offered.
A RELX decision finally to sell may be be influenced by the realisation that its Japanese subsidiary (the country’s largest exhibitions group) is facing further venue disruption from the deferral of the Olympic Games to 2021, after its 2020 schedule had already been disrupted. What has been a reassuringly profitable (albeit non-core) division for RELX has become problematic.
You might also expect change of ownership at some of the large US shows most of which are owned by trade associations which need the funding.
What affects everyone, however, is the disruption to international trade and travel. It’s a subject beyond our remit. But Covid has hit a world where there has been rising populist anger at internationalism, a mish-mash of “anti-globalisation” concern over the environment, and the international transfer of jobs and taxes. Who can predict what kind of longer-term trade boycotts or disruption might yet flow from Covid?
Exhibition companies variously estimate that the current crisis will reduce the scale of their industry by 20-30%. But nobody really knows. After the medical emergency itself recedes, what will be the impact of a deep global recession?
And, then, there’s the Zoom factor.
Denzil Rankine, chairman of AMR / Globex, says: “Virtual will not recreate the intimacy of live, and not all tradeshows will be immediate candidates for virtual. But examples of successes such as private viewings of art fairs and other cancelled events, replicating their main elements virtually, will spread. Virtual will not be just about maintaining contact with communities in the case of cancellations. When normal business resumes, virtual will have earned its place, extending reach both during and also between events.”
That’s a polite push to organisers not to ignore customers who have been excitedly discovering the low-cost convenience of Zoom, Teams, Skype et al for many of their business operations, and the realisation that its popularity may survive (or even grow) beyond the current crisis. Whatever the human need to interact and exchange information face-to-face, virtual “events” are here to stay.
The Zoom era is significant. Elsewhere in media, much is made of the way that Covid has accelerated existing trends: the increased emphasis on digital media has accelerated the decline of print and the growth of streaming services, for example.
Trade show insiders have long debated ‘when, how and if’ it might be the turn of exhibitions to be disrupted by digital media. That time has arrived. There really are some exhibitors who (given half a chance) would like not to spend quite so much on out-smarting their competitors, or visitors who wished they really didn’t have fly to the same crowded show year after year. To some extent, the spell of global exhibitions has been broken.
Take the Covid cancellation of the 103-year-old Baselworld watch fair, in Switzerland, which could not disguise the anger over an event that is said to have lost more than 75% of its exhibitors in the past decade. Some of the same vibes are coming from exhibitors at the cancelled Farnborough Air Show, in the UK, who are fighting for refunds and threatening never to return.
What digitalisation means
These legendary events are not the only ones whose customers may now welcome the opportunity to reconsider longstanding committments, and some relationships are clearly affected by how the cancellations, refunds, announcements and scheduling are handled. A large proportion of trade shows are measurably successful. But the Covid disruption may encourage many to rethink their strategies. Exhibition companies might heed the lessons of other disrupted media, i.e. that digitalisation favours specialisation and personalisation.
Give or take a bit of “concierge” activity, B2B exhibitions are essentially mass market events. But an element of personalisation is just what Zoom could now add to the mix.
It could create new-style exhibition companies, as:
- Organisers becoming integrated providers of information and networking opportunities, both digitally and ‘live’. Revenue could come variously from consulting services and subscriptions as well as exhibitors, visitors and sponsors
- Live exhibitions concentrating on national and regional audiences, with Zoom etc enabling international audiences to participate remotely
- Integrated groups “owning” information in order to provide exclusive content and research to customers – and the glue for their relationships
Many B2B media companies once gave up publishing in order to concentrate on exhibitions. But that was mainly a no-brainer choice between advertising-funded ‘trade magazines’ and the powering growth of events.
In the intervening years, the emphasis of B2B information has swung to price reporting agencies, consultancy, and research – high-value, exclusive data for subscribers. That “must have” information can now become the bridge between live exhibitions and virtual events. The three-way combination can re-energize exhibition companies.
Trade show organisers have long been interested in being information providers and some (like Informa) are serious publishers. But the integration of information services with exhibitions is patchy, to say the least. The systematic acquisition and development of information services could give exhibition companies new profit, and consolidate their leadership in markets where live events may be constrained.
That is why the step-up in digital media is either a substantial opportunity for exhibitions groups (if they grasp it) or a threat (if they don’t). There’s no going back.
Additional reporting and analysis by consultant Alex DeGroote