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FEATUREwww.exhibitionnews.co.uk 27

feature28 www.exhibitionnews.co.ukthe first place is a mistake, Imago's Keeble said. Keeble and his business partner Mark Steel have sold two exhibition businesses in the past 15 years and formed Imago seven years ago. Keeble attributed both to strong brand values and market position."Companies only buy businesses because they are great businesses - not just because they're up for sale," he claimed. "Companies that try and gear themselves for sale by cutting feature spend or staff costs to increase profit margins are doing themselves a disservice. It's absolutely clear to the buyer that is what you are doing."For Keeble, what a potential purchaser wants is what you should be giving your existing investors right now: The right ratio of profit to turnover, year-on-year growth in most of your products, dominant market share, a demonstrably loyal audience and exhibitor base and the potential to expand into new geographies."People think it comes down to lucky entrepreneurs but you don't achieve a good sale through luck - it takes a lot of hard work to get there," he continued. "You need to continue to reinvest and create an unassailable market position."Monnington agreed effective management tools and an uncomplicated, well-managed company structure were important and ultimately demonstrated well-run businesses. Not surprisingly, this makes it easier for potential purchasers to review the likelihood of meeting the forecast revenue for the next show. iOne way of showing efficiency is sales graphs that track cumulative contracted sales revenue on a week-by-week basis and show the current year and at least two historic years. Exhibitor retention rate analysis is also important and in particular should provide analysis trends in the stand size and revenue spend of the top 20 exhibitors, Monnington said. ConClusionMost UK organisers say acquisitions remain high on their agenda as a way to finding growth. Monnington claimed the company's deal pipeline in 2012 is at an all-time high and expected a range of purchases by UK organisers outside of their home territory. "Our percentage of business from non-European M&A continues to increase rapidly, which shows that M&A activity continues to switch to emerging markets," Monnington added. Although easyFairs is concentrating on stable organic growth year-on-year, M&A is helping the company emerge from the recession with an even stronger portfolio, Benyon said."With the economic downturn, we are of course seeing more and more small organisers looking for an exit," he said. "However, they also want to be sure the successor will take good care of the stakeholders - exhibitors, visitors, media, venue and so on. That is why, with our track record, we are an attractive proposition as a potential acquirer. We are well placed to make strategic acquisitions over the medium term."Keeble said buying a pure events business isn't as attractive as it used to be and saw digital trends influencing the acquisitions being sought."The great exhibitions of the future will be a fantastic wash of online and using data from events to have sustainable business products 365 days a year," he said. "The combination of events and digital is amazing and unexplored territory. That link is increasingly important for acquisitions moving forward."Regardless of whether there is a buyer in the wings or not, your key focus still needs to remain on running a profitable, healthy business, Keeble concluded. "You have to have good business principles at heart. Then you'll be a stable company and things will fall into place. People often forget that." the value of a business is normally expressed as a multiple of earnings before Interest and tax (eBIt). Here, Steve Monnington shares the main factors that affect what this multiple will be.. The size of the business - acquiring a business with critical mass was a lot more important to purchasers a few years ago and they were prepared to pay a premium price for size. . Portfolio risk - a single show is likely to be valued at a lower multiple than a portfolio of events because of the higher risk. . Portfolio mix - Physical print products are much harder to sell than exhibitions and, because of generally declining revenues, they attract lower multiples. . Maturity and growth attributes of the business - the fact that your exhibition has been running for 25 years is not usually a strong selling point. Purchasers may wonder whether the best days are over. . strategic fit with the purchaser's business - One of the biggest variables in offers for businesses today is who the purchaser is. there is usually a large range in the offers for any particular business and this is usually a function of the strategic fit. . The sector - Shows in different sectors attract different multiples depending on the growth potential. Sectors such as energy, security and sustainability where there is rapid change and development are currently very attractive. . Market position - a rather obvious one, but market leading shows will always attract a higher value than secondary shows in the same way that vertical shows will be valued more highly than horizontal ones. . The country of operation - the majority of acquisitions over the last two years have been in emerging markets such as Brazil, turkey, russia and China. Most uK organisers today are looking further afield to maintain the growth of their business. Advice corner: explAining multipleswhy you need A formAl sAles processalthough many factors affect the valuation of a business both positively and negatively, Monnington recommends a number of steps that a seller can take to maximise their sale price. "Most organisers have been approached by companies interested in buying their business and it is very easy to get drawn into a one-to-one discussion. However, there are two major downsides for the seller. first, there is no time pressure and these discussions, which are disruptive to the smooth running of the business, can go on for many months without any tangible progress. More importantly, there is no incentive for the potential purchaser to offer a competitive price because there is no competition."a formal sale process solves both of these problems. although purchasers don't like a competitive bidding situation this is a normal part of the acquisition process. In a one-to-one discussion the purchaser can offer a low price knowing that, if it is rejected they can come back with a higher offer. In a competitive situation there is no such guarantee and therefore offers are usually much higher. a timetabled process also keeps everyone focused and minimises the time spent in initial discussion."If you are selling 100 per cent of your business then it is simply a matter of who offers the highest price. Increasingly in emerging markets, sellers are looking for an international partner and are selling a majority stake - usually between 60 per cent and 75 per cent with the rest to be sold at a later date. this requires a more strategic approach as it is not just about the money today but the value of the remaining shares in three or five years' time. "With a partial sale, it is more important to research your potential partner and to assess how much value they can add. the best partner may not be the one who offers the most money upfront but the one who can maximise the business' growth. "With a careful review of your business and a systematised approach to selling and realistic price expectations, a seller can achieve a good price."