Not even a full month into the new year, it’s safe to say that M&A is back in B2B media. Recent weeks have seen a surge of deals including Endeavor Business Media, the industry’s most aggressive strategic buyer prior to the pandemic, acquiring ISE Magazine and ISE Expo; Crain Communications snapping up The Journal of Precision Medicine and its Precision Medicine Leaders Summit; and Informa buying the Premier Show Group (and don’t forget Thomas capping off 2021 with its whopping $300 million sale to Xometry).
Among the biggest deals of the year so far is the $120 million sale of 10-year-old MJBiz, a media and events company serving the cannabis and delta 8 THC industry, to pure play events giant Emerald Expositions. M&A advisors Grimes, McGovern & Associates represented MJBiz in its sale and we caught up with CEO John McGovern to get his thoughts on this recent surge in M&A, what buyers are looking for and whether events are still an attractive buy as the pandemic continues to drag on.
AMPLIFY: We’re now entering the third year of a pandemic. In the first year, the market embraced virtual events, with mixed results. In the second year, we saw the return of smaller scale live and hybrid events. What’s the current appetite for events as an acquisition? What are potential buyers looking for with events and how has this changed from pre-pandemic?
John McGovern: Just two years before, when I acquired the M&A firm, probably 70 percent of our efforts were focused on pure events businesses. After all the cancellations due to the pandemic, I was encouraged in the summer of 2020 when we got offers for pure-play events businesses that had a zero P&L for 2020—no events were going to be held and there were no meaningful media or other revenue streams in those particular businesses.
That told me something—these businesses do have value and do still appeal to buyers regardless of whether or not they have the same number of events in the last 12 months as they had in the previous 12 months. In 4Q 2020, transactions came back and we ended up doing the normal number of transactions with media and events businesses.
The current appetite is very good. In the 18 months leading into the pandemic, you had, I’m going to say, between five and 10 new or returning private equity owners come into what is a relatively small industry in B2B events and related properties. There’s capital there, those funds have been raised for these purposes and M&A is a big part of their strategy to grow those businesses and return value back to their investors and management teams.
It remains a healthy market. Most of these transactions happen right after their main event has occurred because the seller wants to keep the profits, so what transfers on closing day is the data. The value is in the data that these businesses have about their audience and their exhibitors and sponsors and the more that they see themselves as data businesses, the better off they will be.
AMPLIFY: Interesting, this marketplace has seen a shift in media companies really becoming events companies with media. Are they now starting to become data companies where the events are just another channel to generate that data?
McGovern: It’s a combination. Going into the post-Covid world, where you have a chance that something like this could happen again, the Holy Grail is a well-integrated media, events and data business. We know there’s data two ways–either a data subscription product with recurring revenue which has higher valuations, maybe even higher than events, which everybody wants to have but those are a bit tougher to start or find.
The other way is your back-end data, your first party data, your internal database and how strong that is. People like [Questex CEO] Paul Miller been talking about this for 15 years. If you’ve got a business where you can tell a potential customer, ‘here’s a set of people, here’s the websites they looked at, here’s the articles they opened, here’s the booth they stopped during an event and here’s the sessions they attended,’ that really has not changed, in terms of being a priority for media and events businesses. If anything, Covid has made it more important to have strong data and to bring in media. We have buyers who are pure-play event companies that previously never wanted to look at a business that had a media component because it’s a lower margin business that requires different types of people and different kinds of systems to sell media than it does to sell booths and registrations.
It was tough to get them to look at a business that had media but now that has changed and it’s viewed as wise to have that 12-month-a-year engagement with the audience in between all the events.
AMPLIFY: So what does someone bringing their company to market this year need to be aware of about dealmaking in this current pandemic environment?
McGovern: For the independently-owned crowd, the ABCs of dealmaking are clean financials, a good, accurate view on the part of the sellers and firms like us on what their profitability is, what’s the owner involvement and what the owners take out of the business—that all plays into the value.
And then depending on the size of the business, can you have a data subscription product for your market that is need-to-have, not nice-to-have, an events business, both virtual and live, and a media business that’s well integrated on the back-end with a unified database. And on the media side they need to be selling campaigns and have that business be lead-based or campaign based, as opposed to space-based.
AMPLIFY: Grimes, McGovern & Associates represented MJBiz in its $120 million sale to Emerald. What were the key selling points?
McGovern: Well, let’s put it this way, some of the many things that a buyer wants to see in a business like that are,
- good growth.
- good margins
- a market in its infancy
- a good average registration fee to walk in the door, even in an exhibit-driven event
- a strong management team
I think you can probably make the assumption that the MJBiz folks has some of these attributes and Emerald was smart enough to see them.
AMPLIFY: You said people are looking for a market that’s in its infancy. That’s cannabis obviously but are there other markets to keep an eye on for the near future?
McGovern: If you back into it from what’s most capitalized on Wall Street, even though we don’t have a lot of public companies in our world – just a handful of public company buyers – the most capitalized are technology, healthcare and then probably energy. Those are usually the leading markets and it’s about finding new niches in those areas.
On the energy side, it’s definitely the renewable, the sustainability side which even veers into smart cities touching on government and public works type of stuff. With the infrastructure bill, you expect that to be a good area. Then within healthcare, pharma and then technology, there’s just lots and lots of new categories and categories that aren’t new, but just strong and growing.
There are too many niches to mention and there are new ones being born all the time. The event and media industry, we could say, is pretty good at creating new businesses around new topics quickly and early. It’s important in our market that that entrepreneurial energy exists and they succeed in launching.