Background

LDC invested in the show organiser Spearhead in December 2001 and exited to Reed Exhibitions (RX), the world's leading exhibition organiser, 18 months later. AMR has a thorough knowledge of the exhibition sector and assisted both acquirers.

PGI, the US exhibition services and stand-building company acquired Spearhead hoping to cross-sell PGI's core services into Europe. This was not a success. It diverted UK management's attention from exhibition organising and management was offered an MBO.

Spearhead's portfolio was diversified, it spanned oil and gas in Azerbaijan, defence and aerospace in London, helicopters in Brazil and submarines in the US.

Approach
LDC wanted to understand the dynamics of shows and the role each one played in its market. It also needed a clear view of management's strengths, development opportunities, and an exit strategy.

AMR's first step was to gather data on the individual exhibitor and visitor markets, looking for continuing growth and profitability. We met Spearhead management to understand its view of opportunities and threats. Then we conducted in-depth interviews among the company's core customers: exhibitors.

The fundamentals were very strong. Management had built a portfolio of shows that typically enjoyed near-monopoly positions in dynamic growth markets and, importantly, served a fragmented visitor base. Some shows were gloriously simple. The UK Helicopter Show had no competitor, the focus on helicopters ensured the support of the main manufacturers who were fed up with being sidelined in defence or airshows; visitors enjoyed having a ride round the airfield in the latest Apache. Spearhead's Oceanology Show was one of a kind, providing a biennial meeting point for a hugely fragmented and truly global visitor base.

The Oil and Gas Show was tougher. Investment in the UK Continental Shelf was in steady decline, but the show had grown - a tribute to clever management, which was successfully extending the life of a mature show. But this was not sustainable and management needed to open the appeal of the show beyond Aberdeen to the wider global market.

Management was especially strong at spinning new shows out of the existing stalwarts. Sub-sections were incubated within the body of a broader show and when sufficiently mature, they were spun out. Management was not aggressive and would only launch if it was confident of profits from the very first edition. Senior management were committed and strong at nurturing staff in a mutually supportive culture. The focus on customer relationships was good, perhaps too good - it could have been tougher! This raised concerns of the cultural fit with the key potential exit partner, RX, which is very bottom-line driven.

On re-examining Spearhead this autumn, we found some new faces, but fewer people and the business in smaller, austere offices.

We were pleased to see that management had taken on board our findings. A new show manager from the oil and gas industry had internationalised Offshore Europe, broadening coverage to widen international appeal. Spearhead had also examined revenue extension, notably through sponsorship. Best practice was now being better extended across show teams.

The biggest change had been the disposal of the Azerbaijan Oil Show. The show director moved in the highest diplomatic circles at the right embassy functions; she was absolutely right for the show. Correctly, LDC feared the volatility of the market could deter exit partners and therefore accepted her buy-out request.

The portfolio was a neater, tighter package than when we first examined it. The one hitch was that both vendor and acquirer knew realistically that there were few realistic exit alternatives. This hurdle was overcome and RX acquired the business in August 2003.

Result
LDC saw a rapid exit and an IRR of 36% and RX acquired a strong business with a neat fit to its portfolio. Days after the exit, the press was full of pictures of protestors outside the Defence Show - LDC were happy that RX could deal with that problem!

“AMR helped us to understand the quality of the individual exhibitions. It was some of the best informed and conclusive CDD I have ever seen. I appreciated AMR's readiness to give opinions.”
Mike Simmonds LDC