Deal in focus: CloserStill, or the merits of good management

Alice Murray
13 March 2015

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Inflexionтs purchase of a minority stake in exhibitions business CloserStill highlights a management team keen to stick with private equity in order to carry on building their entrepreneurial vision. Alice Murray reports

Monday's deal, thought to value the business at around £100m, saw previous backer Phoenix Equity Partners exit its holding in the business – generating an impressive 3.5x return after just three years – while long-term investor NVM Private Equity rolled over its holding.

CloserStill's management team, led by Andy Center, has a long history of working with private equity. In 2005, NVM backed the team's MBO of Ithaca Business Media from former US parent Penton Media. Just two years later, the business was sold to trade buyer United Business Media for £14.25m, generating a 3x return.

With the management team looking for a new venture following the sale, NVM supported the creation of CloserStill in 2008 – a new business set up by the Ithaca team. "Starting again with a clean slate allowed the team to select the sectors they wanted to focus on and to pick exhibitions they wanted to acquire that sat well with the strategy," says Peter Hodson of NVM. The new entity decided to focus on the healthcare and technology markets, viewing them as global, high-growth and defensive.

Prior to Phoenix's investment in the company in 2012, management were preparing to sell CloserStill off to trade. But as they wanted to keep operating in the exhibition market, the team formed another new company, Closer2. Hodson explains the reasoning behind this: "We wanted to continue launching and acquiring new shows but needed time to invest in the content and to drive the sales growth in order to develop attractive assets for a buyer."

Rather than a trade buyer picking up CloserStill, leaving the firm's management team to focus on Closer2, 2012 saw Phoenix acquire both businesses to combine them, with NVM rolling over a 10% stake.

For Phoenix, the exhibition market had been identified as a key subsector following the closing of its 2010 fund. "We saw it as an exciting sector that was fragmented, had good visibility and where good businesses had the opportunity to grow quickly," explains Kevin Keck, partner at Phoenix. "We met Andy two years prior to investing, and he had a real vision for growing the company."

Timing is everything
Three years later and CloserStill's revenues had trebled while profits had quadrupled. Furthermore, with the support of its private equity backers, the company expanded internationally and now generates 20% of its revenues outside of the UK. Over the past three years, CloserStill has made six bolt-on acquisitions and launched 10 new events, four of which are based outside the UK.

Phoenix launched a sale process for the business in 2015 – with margins of around 50%, a hugely cash generative business (as exhibitors pay before the shows) and a fragmented market ripe for consolidation. The timing of the sale is due to strong corporate M&A activity in the sector with UBM and Informa having recently done deals, which resulted in inbound interest for CloserStill. Indeed, according to Simon Tuner of Inflexion, the GP had been tracking the business for several years.

Inflexion won out over several interested parties and invested via its Partnership Capital fund, which focuses on minority deals. This time, CloserStill's management took a 50% stake and NVM once again rolled over its interest.

The attractions to the business are clear, not only from the amount of interest it has garnered from both private equity and corporates, but also from the notable lack of debt – of the many deals this young company has been through, none have used any leverage.

One of the strongest qualities cited by all three of its backers is CloserStill's resilience, as the company achieved impressive growth throughout the recession. It should be noted that the business was set up during the downturn, and thanks to its sensible strategy it prospered. But an underlying factor remains – exhibitions and trade shows are dependent on marketing spend, which is often the first budget to be cut when times are tough.