Informa is the former newsletter publisher which was transformed by audacious M&A into an international information and events group. Some of the deals were inspired, like the 1990s all-share mergers with the publishers of Lloyd’s List and Taylor & Francis. Some were a bit scary, like the £770m acquisition of conference organiser IIR. And some were just painful, like the £500m Datamonitor.
Investors alternately cheered and jeered the gung-ho Brits Peter Rigby and David Gilbertson as they pushed the boundaries and worked their magic for more than a decade. Soon after fellow board members rejected their pleas to accept a bid from Springer Scientific at a price which proved to be almost the high-water mark of Informa’s volatile shares in 2010, Gilbertson left and the company seemed to lose its mojo. Rigby quit in 2013 with too few remembering just how he had turned a bankrupt publisher into the £2bn B2B powerhouse.
It somehow seemed appropriate that the chirpy Rigby would be succeeded as CEO by Stephen Carter, a former advertising and telecoms executive who had been the UK’s communications regulator and adviser to the Prime Minister on digital strategy: he ticked all the boxes in business, politics and technology. Investment analysts saw the 2013 appointment of Carter (who had been an Informa non-executive director for three years) as signalling a less bumpy strategy. More blocks, fewer shocks.
That was the mood music to his Growth Acceleration Plan which aimed to invest in business intelligence and events while maintaining the modest but consistent growth of academic publishing. Informa would be more strategic and less opportunistic.
In strategy sessions, the new executive team discussed the attractive characteristics of trade shows where market leaders were difficult to shift and had pricing power, not least because their charges were only a small fraction of exhibitor costs. The longtime exhibitions leader Reed had only a 5% share of the fragmented global market, looked a bit sleepy – and seemed not to be very acquisitive.
In 2014, Informa pre-empted an auction to acquire Hanley Wood, the US organiser of 17 trade shows in construction and real estate in a $375m deal, following which North America would account for 50% of its exhibitions revenue. The price was 5.5 x revenue. A year later, Informa paid $1.56bn (10 x EBITDA) for Penton, organiser of 30 exhibitions, 20 digital services and some B2B magazines.
The deal made Informa the world’s third largest exhibitions group and helped to catapult it into the UK’s 100 leading public companies. But it was only just beginning. Just 18 months later, it announced an audacious £4.3bn agreed bid for the listed UBM, the world’s second largest exhibition organiser which – for two years – had been shedding its B2B publishing in pursuit of an ‘events first’ strategy. The two companies had almost merged in 2004 and 2012 but talks had reportedly foundered on the little question of which CEO would get the job. Now, there was no such contest.
The two companies were a natural fit with almost no overlap, even though investors momentarily worried about whether UBM’s value had been inflated by scarcely digested recent acquisitions in the US and Asia. But there was no denying the attractions of a “merger” to create a new market leader: 2+3=1. That’s one reason why the deal was agreed so quickly – in two months and five meetings between Carter and Tim Cobbold, who had been CEO of UBM for only two years.
Some insiders even joked that Cobbold might have been relieved to get out, after warnings about the three-times-bankrupt Advanstar which UBM had bought for $970m just a few months after he joined. That deal had been described as “big and brave” by one analyst who pointed out some details not well explained to shareholders: like the Progressive International Motorcycle Shows – touring events whose menu of bikes, stunt riding, and ‘glamorous’ women attracted hundreds of thousands of paying customers. Not very UBM or Informa – and curiously invisible, even now, on corporate web sites. But the Magic fashion trade shows – which were responsible for all Advanstar’s profit growth – made the case (even though they would provide some early indigestion for Informa).
Cobbold and Carter agreed the deal at a 30% premium to UBM’s share price. Informa was able to highlight UBM’s substantial assets in the world’s largest trade show market (the US) and its fastest growing one (Asia). Carter claimed that – while UBM’s Asian business was some 40-50% of its revenue – it accounted for more than 60% of the deal’s value to Informa.
He tried hard to project the acquisition as a “merger”. Of course. He praised the UBM executive team which, he said, had been pursuing a strategy similar to his own. Informa added three UBM non-executive directors to its board and, although the exhibitions management team is now only 20% ex UBM, the “immigrants” include the leader of the crucial Asia business which, until very recently, was still known as UBM. (No fewer than nine of Informa’s 20 largest events in 2019 were ex UBM).
But – less than two years after the transformative deal – the pandemic struck.
The suspension of exhibitions, international travel and much else sliced almost two-thirds from Informa profit. Its exhibitions – which had been 50% of group revenue in 2019 – became lossmaking in 2020. But all the company’s other operations, including academic publishing, were also down on revenue and profit.
Informa’s Covid year has been spent raising cash from shareholders, cutting costs, and working out how best to profit from new-wave virtual events. It claims to have organised some 500 online events, including 100 exhibitions. But the world’s largest trade show organiser is now trumpeting the resumption of live events, especially in the US, China and the Middle East, knowing that its £5.6bn of acquisitions had delivered only £1.5bn of profit before the shutdown. Informa now has an enterprise value (including £1.8bn debt) of £10bn – 25% down in little over a year.
In a week when the smaller, UK listed exhibitions company Hyve Group is reported to be negotiating a £250m injection from Carlyle private equity, Informa has declared that its China business is bouncing back with “some domestically focused brands return close to pre-Covid levels of revenue and participation”. But these are very early days, with plenty of opportunity yet for annual exhibitions to miss their second or even third outing. Then, there may be some inevitable, last-minute cancellations of resumed events, due to renewed outbreaks or travel restrictions. Even more likely, the reduced scale and success of some resumed events may disappoint participants. And that’s before organisers work out how best to provide digital remote access without choking off the recovery of live events.
As a listed company, Informa is treading the fine line between inspiring its investors with the green shoots of recovery and minimising the risks. Beyond anything digital, the most obvious short-term impact of the pandemic will – surely – be on the number of live events. Most insiders believe there will be a reduction of at least 10% in the number of exhibitions, which might mean 50 fewer events at each of Informa and Reed. But, in an industry that almost invented the ‘long tail’ of low-growth products, nobody wants to talk about closures. Shows will be merged, co-located or postponed and quietly deleted from web sites.
Informa may provide the clues to these changes in its half-year financial results at the end of July. We might also expect explanation of how digital media and live events can be successfully fused – and how Informa can lead the industry in integrating information services and exhibitions in vertical markets.
It already has a model with its InformaTech data, events and consulting in the global technology and communications industries. The two-year-old group includes 26 media sites with a claimed 4m monthly uniques, 100 events attended “normally” by 225k visitors, a consultancy, and subscription research. InformaTech brands include: Black Hat, Information Week, KNect 365, AfricaTech, the AI Summit, Tech Week, and Ovum. It may be a coincidence that this integrated B2B unit neatly spans Stephen Carter’s own background, but it could be the role model for other markets in Informa and elsewhere.
The trouble, of course, is that these are the most difficult times even to think about the total reorganisation of a company while trying to recover from 12 months of lossmaking: there’s too much disruption already. But there is also M&A opportunity. The trade show recovery will create the scope for event rationalisation and JV collaboration of the kind that Informa has been able to achieve in its information business. But the real question is whether the exhibitions company will again become a consolidator in a world where its 6% market share scarcely precludes any acquisitions, despite its leadership position. Or whether the listed company itself will – at any sign of weakness or disappointment – be snaffled by private equity.
At this stage, most investors are betting that Informa Plc will be able to resume the winning strategy interrupted by Covid. A Bank of America analyst said last month:”The US is the largest exhibitions market globally and a key barometer for broader industry reopening. In recent months, we’ve seen momentum starting to rebuild in key exhibitions markets like Las Vegas and Florida. This is a potentially important driver for Informa’s revenue in FY21, but we also expect early data from shows that run in-person to cement the importance of face-to-face interaction in a post-pandemic future, which is supportive for Informa’s events exposure as a whole.” Here comes summer.