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June 1, 2021

How to Prepare a Business for Private Equity Acquisition

The trade show industry is highly fragmented and one that certainly flew under the radar for a long time. However, this industry has been gaining traction and has started being noticed by PE firms. Helping us understand PE firms better and how to prepare a business for a private equity acquisition is Philip Soar, Executive Chairman and CEO of CloserStill Group PLC. 

What makes trade shows attractive

According to Philip, trade shows have become a very attractive investment for private equity firms mainly for four reasons. The first one is high margins. If you have a well-run business, business margins can range up to 27% to 30& yearly. Second, payments are cash upfront because exhibitors pay you in advance, and you only pay the cost of running the exhibition when it happens.

There is also a high barrier to entry. Exhibitors get protection from competitors because once you have a good relationship with a particular company in a specific industry, then no other competitor will be allowed to participate in that trade show. This ties back to the last part: if you have good relationships with your exhibitors and you can run a good solid trade show, they will most likely be recurring customers for you for your next event. 

All of this shows high profitability and stability, which is why PE firms have started noticing this industry. Although, all of these benefits were around 20 to 30 years ago.

Preparing for an Acquisition

PE firms love a good spreadsheet, which makes KPIs extremely important. This is why Philip has an enormous amount of spreadsheets full of KPIs. Trade shows are measured on average revenue per square meter, so it is crucial to have at least ten years of history in your record if possible. 

The more information you can provide, the happier the PE firms will be, because it saves them a lot of work. Furthermore, it shows them that you are organized about the things that matter in your business, which will make you even more attractive. 

What to look for in a PE firm

Philip always uses bankers instead of PE firms to create a competitive process when it comes to selling companies. However, even with all the bidders, price isn’t the only thing important to them. 

Philip has rarely seen a deal where the PE firm walks away and leaves you alone. It’s usually a buy-and-build acquisition, and it is critical to be working with people you trust and like. It also helps a lot if the PE firm has experience in your sector. 

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