Buying and selling expositions involves much more than an exchange ofassets. It's a complex combination of informal communication and no-stone-unturnedinvestigation. Corporate and career goals, marketing strategies, interpersonalrelationships, trust, humanitarian concerns and reputation are all partof the process for both buyer and seller. Consequently, there is no "typical"sale. Each one has its own characteristics, determined to a great extentby the individuals involved.

People buy and sell shows for many reasons. A buyer is usually lookingto grow the business. For example, Phillip Ullo, President and Chief OperatingOfficer of Reed Exhibition Companies, says, "We have strategic long-termobjectives, and acquiring shows is one way to reach them."

For some buyers, growing the business could mean acquiring a show thatcomplements existing events, and continuing to operate it, or acquiringa show that competes and either folding it into another show, or foldingit period. It could mean acquiring a show in an industry or a geographicarea where the buyer would like to gain a presence more quickly than canbe done by starting a new show.

A seller may want to realize a financial return on a successful businesshe or she has built -- or may be in financial difficulty and looking fora way out. He or she may want to get out of the business entirely, or maywant to remain in it but without the responsibilities of ownership. Thereare probably as many variations on those reasons as there are individuals.

Success sells
"The best preparation for a sale is to have a superb product -- a successfulproduct," says Larry Hollander, President of Expoconsul InternationalInc., who sold four shows in early 1990. "We developed an awesome show,"he says. "About five people came after us, and we sold to the one whooffered the right price."

Generally speaking, the more successful the show is, the easier it willbe for a seller to find a buyer. Says Ullo, "Ninety-nine percent ofthe time, I wouldn't look at a show if it weren't successful. I'd ratherstart one myself." But Ullo didn't say "never"; he said "99percent of the time." And many show managers say that there are circumstancesunder which they would consider acquiring a struggling show.

For example, Robert Harar, President and Chief Executive Officer of NationalTrade Productions, says, "We have specific criteria for shows we acquire.First we look at the success of the show -- its reputation and its longevity.Also, we look closely at how well it fits our long-range plans and the marketswe serve." Harar recalls, however, a recent acquisition that did notmeet his success criteria: the Federal Computer Conference.

"It had been sliding in number of exhibitors and attendees, andin impact," he says. "But one of our areas of major focus is thefederal government, and the FCC was our only competitor. Even though itwas on a downswing, we looked at it closely. We always thought that if itcame into the NTP fold, we'd have the only strong presence in marketinginformation technology to the federal government. The fit was there forus. We know the market so well, we knew we could build it up." Theshow is doing well now, says Harar, although he admits it will take a whilefor it to achieve the results he wants.

Bill Weber has experienced both sides of the transaction. Weber, whois Chief Executive Officer of MultiDynamics Inc., has sold two shows, andrecently acquired what he describes as a "turnaround" show inthe aviation industry. He says he's now facing two challenges: getting intoan industry that's new to him, and rebuilding the show. "It's white-knuckletime," he says, using an apt metaphor. "But this is an industryI've always wanted to get into." Thus, he feels that the potentialjustifies the risk.

This is not to suggest that show managers don't need to be concernedabout the quality of a show they hope to sell. They certainly do. However,they should be encouraged to know that there may be a buyer out there evenfor a show that is not tops in its industry.

Get the word out
Whether your goal is to sell or to buy a show, you start in the same place:the network. "Let the industry know that you're in a buying mode,"says Paul Mackler, Chief Executive Officer of Conference Management Corporation.One specific action he suggests: "If you buy a show, send out a pressrelease. That alerts future potential sellers." Mackler also recommendstalking with industry contractors, vendors and suppliers. "They areoften approached by their own customers," he explains. "The networkbetween producers and vendors is an excellent route."

Ullo says that Reed makes more acquisitions than most companies simplybecause of its size: it produces some 300 events worldwide. Consequently,"We have people who focus on acquisitions," he says. "Wemight identify gaps in our portfolio and look for exhibitions out thereto fill those gaps." When such an event is spotted, he explains, "Wefind that the best approach is through the network -- or just to pick upthe phone."

There are show brokers who can act as liaisons between buyers and sellers.(Often the same people are media brokers, because the buyers of publicationsand shows may be the same.) But opinion of their function is divided. "Thereare reputable brokers," says Mackler, who speaks positively about them."They know who the potential buyers and sellers are, and they'll findyou."

So they will. Harar, who says that NTP is becoming more aggressive aboutletting the industry know it wants to buy, gets calls from brokers all thetime. But they may be calling the wrong person. "I don't put too muchcredence in brokers," he says. "To me, the broker is a middlemantrying to learn about the show. If I want to talk to someone about a show,the best line of communication is with the principals."

Although some believe that buyers or sellers might attract attentionwith ads in industry publications, the general feeling is that advertisingis the least effective route. What works best is the network.

The paper trail
Eventually, potential buyers and potential sellers become aware of eachother, and the "mating dance" begins. At this point, buyers wantto review mountains of documents. Anyone thinking about selling should besure to have clean, complete records for a minimum of three years -- fiveis preferable. The basic records generally required are revenues from allsources, including booth sales, exhibit attendance, conference attendance,directory advertising and sponsorships; plus lists of exhibitors and attendees,exhibitor contracts and hall contracts.

Mackler, for example, says, "I want all the financial records, bothcurrent and past, including a detail of expenses. I want to see exhibitorcontracts and seminar records, vendor and facility contracts, lists of attendeesand exhibitors with phone numbers, and all miscellaneous agreements, suchas sponsorships or consulting agreements. I also want to see confirmed salesfor the next show."

Using those records, Mackler says he can make a fair determination ofwhether the show is growing, stagnant or declining. "The attendancetrend, and the quality of attendees, are key considerations. Some sellersare not willing to provide all this inforrnation," Mackler admits."So we factor that risk into the value."

When Weber sold his shows, he found that buyers wanted to see a five-yearhistory of exhibit sales and attendance, plus all the financial statements.He was willing to provide those documents, but with this stipulation: "Iinsist on a non-disclosure statement, so that they don't reveal the financialsto anyone else. That's vital."

In addition to historical records, buyers want a look at the future.Mackler mentioned wanting to know what sales were confirmed for the nextshow. Another critical concern is lease agreements, says Ullo. "Fora major show, be sure the facilities have reasonably secure lease commitments.You don't want to find out three years down the read that no one protectedthe dates."

The industry, and the show's position in it, are also factors. "Welook at the universe they're serving," Ullo explains. "If it'ssmall, we can't be overly aggressive in our projections."

Mackler advises, "Look at the competition. Where does this showstand? The No. 2 show in a 10-show industry is much different than the No.2 show in a two-show industry."

Buyers seldom set much store by the seller's marketing plans, becausethey intend to implement their own. However, a review of the marketing thathas been done in the past may indicate how much of the potential of theshow has been realized, and what opportunities remain.

Check it out
As important as all the required documents are, they are by no means thesole basis for decisions. Valuable insights can be gained by talking withexhibitors and attendees.

"We like to do our own survey of exhibitors and attendees,"says Harar. "That can help us determine if the show is on a growthcurve or a downturn. You usually sign a non-disclosure agreement, so youmust be very discreet. But you can have independent researchers do a blindtelephone survey. They can ask exhibitors, for example, what shows theyexhibit in and why, if they've dropped out of any, and so on." Butinformal communication also comes into play here. "Sometimes you canjust have conversations," he says. "A lot of it is relying onpeople you respect."

Weber prefers an informal survey mainly because it eliminates the middleman."The disadvantage of having an independent do the research is thatyou're not hearing the answers directly," he explains. When he waspreparing to buy the aviation show, he says, "I did my own researchby conducting personal interviews with exhibitors. That survey told me whatwas wrong with the show and what needed fixing."

Non-disclosure agreements are usually required by most sellers. Hollanderexplains why he insisted on such an agreement for the shows he was selling:"I didn't want my suppliers and exhibitors to know that I was for sale.Exhibitors might back off if they don't know who's going to buy." That,of course, could weaken the show and sabotage the deal. He notes anotherconcern: "People might lose their jobs, or they might fear that theywill," and he didn't want them operating in a climate of fear. "Itwas my people who gave the show the value that enabled me to sell at a primeprice."

The art of the deal
If, after intensive research, a prospective buyer continues to be interestedin acquiring a show, negotiations can begin and contracts can be written.From here on it's critical to specify so that both parties understand andagree completely exactly what is being sold/bought, and what the relationshipof the seller and buyer will be after the transaction is complete. Thatmeans spelling out employment terms, non-compete agreements and paymentterms.

Attorney Jed Mandel, a Partner at Neal Gerber & Eisenberg, pointsto a wide range of tangibles and intangibles that might be part of the deal."If I own the ABC Computer Show, I may be selling only the name, theexhibitor list and the attendee list. Or I may sell the whole corporation.That might affect whether or not someone is buying the liabilities as wellas the assets," he continues. For example, "What happens if someonebrings an action for damages at a previous show? And what happens in regardto incidents that occur after the sale?" Because of such concerns,he says, a seller might want to be indemnified, it depends on the natureof the sale. "Lawyers want to spell it all out -- and it's in the interestsof both parties to do so," he maintains.

When Reed acquires a show, says Ullo, "We try to take what we considerto be valuable. That means assets like trademarks, copyrights, exhibitorand attendee lists and lease agreements. Fixed assets are really not important.

"People are probably the most valuable asset," he continues."The current staff is very important to us." Certainly it seemsreasonable that if the staff is knowledgeable, competent and has contributedto the success of a show, the new owner would want to offer them the opportunityto stay with the show. However, if those people are involved with othershows that the seller is keeping, he may be reluctant to lose them. Theemployees themselves make the decision, of course, and it may well dependon whether relocation is involved, or just a change in the line of reporting.But in any case, buyer and seller should discuss whether or not an offerwill be made.

Mackler points to one possible concern: "If I'm buying an entirecompany, and keeping the staff, I'm not going to have as much control. IfI want control, I'm not going to maintain the staff." But the decisionalso depends on location. "It can be very difficult to manage peoplewho are three thousand miles away. But even more important is the compatibilityof company cultures and their approach to doing business." So, onceagain, these are case-by-case determinations.

There is, however, a widespread preference for having the seller remainwith the show. "I'd like to get the seller to stay on for about fiveyears," says Ullo. "Many times they get excited about stayingon with us because we give them an opportunity to reap future growth."The seller might not want to remain, Ullo explains, if he plans to retire,or wants to get a nest egg and go into another business. "That requiressitting down with the owner and deciding what he's trying to accomplish."

In Weber's view, "It would be foolish not to have the seller involved-- to have his input and support." That doesn't always work out, ofcourse. "If the seller were going to retire and go to Florida, thenyou would want a clean break." As for a situation where the sellerand buyer might not be compatible as business associates, Weber is veryclear about where he stands: "If the seller is an adversary, do youwant to do this at all?" Here again, personalities are an importantcomponent of the transaction.

Although several people say that a seller who stays with the show couldrealize financial benefits, Weber sees a possible downside for the seller."It's good to keep the seller involved, especially monetarily,"he says. "There should be pay relative to performance. If there's abreakthrough, both should win. But if there's a new development that bombsthe thing, both should suffer." Of course, the seller of a troubledshow might have second thoughts about that, unless he was confident thatthe new owner had the money and expertise to effect a turnaround.

Non-compete clauses
When Weber sold his shows he was kept on as a consultant, and the agreementgave him a percentage of gross revenues for five years. That yielded yetanother benefit for the buyer, Weber explains: "It enforced a non-competeagreement. If you break the non-compete, it blows the compensation."

Non-compete clauses are a critical part of the agreement. Understandably,"The buyer wants the longest and broadest non-compete, but the sellerdoesn't," says Mackler. "So you must settle in the middle remainingmindful of enforceability."

In addition to satisfying both parties, non-competes must be writtenso that they will stand up to a legal challenge if necessary. Attorney Mandelsays that non-compete clauses are legally enforceable if they are very specificabout what is considered to be competition, and also define the geographicand time elements. For example, says Mandel, the clause would probably haveto prohibit the seller from competing with a particular show, as opposedto saying that he cannot get involved with any shows.

"If a show is national or international, you probably can't do muchto limit activity," he says. "But if a show is held in Boston,the seller might be prevented from doing a similar show within 200 or 500miles of Boston. Very narrow limits could probably be imposed for threeto five years. If they're very broad, they're probably just for a few months."Note that Mandel's remarks are sprinkled with "probablys" and"mights." It's impossible to give firm guidelines that will fitevery set of circumstances.

According to Francis Friedman, who was responsible for mergers, acquisitionsand new show start-ups while Vice President of Corporate Development atThe Interface Group, and is now a strategic development consultant specializingin the exposition industry, "The courts have ruled that non-competesmust be reasonably focused. They are usually for three years or five years-- enough so that the acquiring company can establish its relationshipsin the industry." As for the geographic limits, he says, "Theclause can be drawn so narrowly that, for example, a person couldn't competein the five counties around a local public show."

The non-compete agreement that Weber signed was quite specific withoutbeing what he considered unreasonably restrictive: "I agreed not tobe involved with a show where 25 percent of the exhibitors or attendeeswere from the same base as the show I was selling. But we decided that itwould be possible for me to stay in the industry."

Related to the non-compete restrictions, says Mandel, is the treatmentof what he calls "confidential information" -- information thathas been developed specifically for the show. "When those provisionsare written," he says, "the seller could be prevented from usingthat information for another purpose, unless the information is publiclyavailable or could be available from other sources. For example, if theseller had exhibitor lists, he might be prevented from using them -- andthat could be forever."

Payment terms
Working out the payment terms is less complicated than putting a price ona show (see No reasonable offer refused),but it's still far from straightforward. The terms are influenced by personalpreferences and situations, the status of the show and the post-sale relationshipof the buyer and seller. Although a lawyer should certainly check the agreementfor clarity, "There are no legal constraints on the creativity of buyersand sellers," says Mandel.

Friedman apparently shares that view. "Terms can range from straightcash, to a dollar down and a dollar a week," he quips. But, seriously,he has found that the buyer usually puts down from one-third to one-halfin cash, and a pay-out schedule is structured for the balance. "Thebuyer may want the seller to stay, and may pay more -- an 'incentive buyout'-- if the show achieves mutually agreed-upon objectives." Such an arrangementcould be advantageous even for the seller of a struggling show, he believes:"Many times a show is marginal only because the seller lacks workingcapital But with a well-funded partner, it will spring to life."

According to Harar, "The terms depend on the needs and goals ofthe seller. If he wants out, he might want a lump sum -- but he'll get less.Or payment could be spread out over five years and the seller could ridethe success or failure of the show. Or if the seller allows me to staggerthe payments, I might pay him 25 percent more." If the seller signson as a consultant, says Harar, a $1 million purchase price could breakdown into $500,000 for the show, $300,000 for adhering to the non-competerestrictions and $200,000 for consulting services.

"It's probably an exception for a lump sum to change hands,"says Ullo, because the seller runs a personal, non-financial risk if hetakes the money and walks away. "Generally, when a person sells, hewants a reasonable assurance that the buyer will not throw away the businesshe's built." That's another reason that the seller likes to stay involved,he says.

Mackler says financial transactions can include those in which thereis no cash up-front and the buyer assumes the seller's debt, or where thereis some cash up-front and the debt is assumed, or where a flat sum of moneyis paid and no debt is assumed. Large transactions may even involve bothcash and stock transfers. Much depends on the strength and condition ofthe two companies involved.

Clearly, it can take an enormous amount of time for the buyer to conductall his research, and for both parties to reach agreement on all componentsof the transaction. But no matter how long it takes, and no matter how closeagreement seems to be, Hollander advises, "The seller should assumethat the sale will not go through, and keep doing business as usual."His reasoning: "There will be tremendous pressures on you, and negotiationsmay break down. If you have stopped all activities because you assume yourshow is sold, and the sale doesn't go through, you're left with damagedgoods. If the sale does go through, then you're selling damaged goods."And that hurts the seller's reputation -- which is beyond price.

Sidebar: No reasonable offer refused