Strong growth in trade shows likely to juice Nielsen auction

The recent decision of Nielsen Holdings NV to shop its trade shows makes sense in that Nielsen Expositions, the smallest of the company's three segments, contribute a mere 3% to total revenue. But the auction's timing also makes sense in view of trade shows' rising importance in the B2B firmament.

The latter may not be readily apparent from the 2.2% revenue growth that Nielsen posted for its expositions in 2012. The segment gains undeniable appeal, however, on considering Bank of America Merrill Lynch calculations that show this modest revenue increase boosted the segment's Ebitda by 8.1% last year and that Ebitda margins for Nielsen Expositions should stay steady at 51% for the foreseeable future.

Moreover, on assessing the role of expositions in B2B, comparisons to trade publications are inescapable. And, in making just such a comparison during its most recent investor day, Nielsen competitor UBM plc noted that total B2B ad pages in the so-called tech space have declined 83% in 12 years. In contrast, the London-based global B2B service provider continued, live events sponsored by its UBM Tech division recorded organic growth of 69% between 2006 and 2012.

"Expositions are no longer thought of as a waning business in the mode trade magazines might be," said a banker who specializes in B2B and, because of his proximity to the Nielsen Expositions auction being managed by Credit Suisse Group, asked for anonymity. Granted, growth may not be as great as it once was, the banker admitted, but trade shows have demonstrated themselves to be a solid, profitable, cash-efficient business -- "a model highly attractive to private equity."

Nielsen, based in New York and Diemen, Netherlands, knows this attraction intimately in that a consortium including T.H. Lee Partners LP, Kohlberg Kravis Roberts & Co. LP, Blackstone Group LP, Carlyle Group, Hellman & Friedman LLC and AlpInvest Partners NV took the company private in 2006 for $10.3 billion. Most have kept their interest in the company, although some cashed out a part of their holdings when Nielsen launched a $907.5 million secondary offering March 2012.

Sources said the company's December agreement to acquire Arbitron Inc. for $1.26 billion has increased Nielsen's need for cash, even as the proposed transaction wends its way through the regulatory-approval process. (Arbitron insisted in a staff memo last week that a second request from the Federal Trade Commission was anticipated and not cause for undue concern.) And while the combining of Nielsen, the leader in television ratings, and Arbitron, the leader in domestic radio ratings, has enough monopolistic appeal to put the regulatory authorities on high alert, the merged entity would also make Nielsen Expositions even more of a rounding error inside the measurement goliath containing it.

This suggests the segment stands to receive even less attention from Nielsen management, especially since that management has jettisoned other B2B operations along the way. If sold, though, Nielsen Expositions would likely command considerable cash at a time its parent company has more than $1 billion of what BofA Merrill Lynch called "several pieces of higher-cost debt in its capital structure." Or, as the banker source put it, a multiple of 7 times the segment's lagging Ebitda of $94 million would not only deliver $758 million but, to the right buyer, be "completely justifiable."

Who that buyer should be is for CSFB to decide. Yet some observers couldn't resist wondering if Providence Equity Partners LLC, which entered the trade-show business by acquiring George Little Management LLC for $173 million in August 2011, might now be ready for a deeper dive.

"A lot of it depends on how much they like the business and the way Charlie McCurdy is running it," one source said. McCurdy, a Primedia Inc. veteran who most recently served as CEO of Canon Communications LLC, did not return calls for comment.