Inside the $1.77bn CloserStill Media deal with Phil Soar, Chairman of CloserStill

Speaker A: Phil, you've built and scaled multiple businesses in this industry. Where does this deal rank, I guess emotionally for you?

Speaker B: Pretty high, isn't it? Really? Um, um. It's the second biggest deal ever for an exhibition, uh, company, uh, after the ubm, uh deal, uh, with Informa. Uh, and I suppose that's something, uh, to be proud of. Um, and also because unlike most of the other companies in the sector, it was a startup that started from nothing in 2009, as you know, whereas most of our other big companies have got much, much longer histories. So it's been a relatively short history, really.

Speaker A: Fantastic. Yeah. M. If I'm not mistaken, it started, I think the first office was in, uh, on a farm, wasn't it? Somewhere.

Speaker B: It was, it was in. It was a pig farm actually. It's a pig farm, uh, somewhere near Coventry. That's right, yeah.

Speaker A: Could you ever have imagined back then that you'd be in this position today? I know it's always a strange, uh, question to. No one knows what the future holds.

Speaker B: But I don't think you think about it, do you? You, you go from day to day, from year to year, so. And you just see what happens. Uh, and I've done that a few times, obviously.

Speaker A: Absolutely. So industry reports, uh, are suggesting the valuation of closest deal around $1.7 billion.

Speaker B: Um, yeah. 1.1.3 sterling. $1.77 billion. That's right, yes.

Speaker A: Why was now the right moment for this sort of deal?

Speaker B: Well, of course as with nearly all of our larger companies, um, not really Informa, but they all have private equity investors. Uh, and the private equity investors, uh, own the majority of shares. And the decisions are really in the hands of the private equity investors, um, Providence, who, uh, very, very good investor. They used to own Clarion. Uh, they were the originators of Emerald, um, know the sector very, very well and uh, they've been invested in, closest to all for nearly eight years, which is a long time, uh, for a private equity investment. Um, and so we'd actually been looking at doing something since, certainly since 2004. Um, and then, uh, last year things were going very, very well, as I think you know. Um, so in a sense there wasn't any urgency. And then when Blackstone bought Clarion to the market, we obviously, um, decided that we couldn't conflict with them and we had to wait till their process was finished before we could think about it. But eight years is a very, very long time for private equity investment. So, uh, understandable that Providence wanted to do something.

Speaker A: Lots of rumors going around about, um, the makeup of the deal and whether it be a trade sale or which private equity firm. Um, I think I read even a couple of days the deal, an insider, whoever that might be, suggested it might be, uh, the private equity company. Um, but what was it about Searchlight that made him the right partner?

Speaker B: Um, Searchlight. Very interesting. I mean, they're very, very big fund. Um, and of course, they're the smaller investor in Hive already. Uh, and so they do know, um, something about the industry. Know a lot about the industry, actually. Um, and, uh, Jamie Redmayne, who runs their operation over here, is a really, really big enthusiast, um, uh, for the trade show industry. He's also a fanatic Arsenal supporter, which means he and I always have plenty to talk about. Um, the deal isn't. Isn't quite as it's reported. Um, because what happened was the following. If you'd like me to go into it. Private equity companies have a series of funds, and all of the funds are different. Um, and so while you have a private, uh, organization like Providence, they actually control a whole series of funds, not one fund. And closer still was in their Fund 8, which was the eighth fund that they'd ever raised. And we've been in that firm for about eight years. So Providence, basically, the Providence 8 Fund, has basically sold closer still. Full stop, 100% gone. And, uh, the revenue from that sale will be distributed among the shareholders, um, in the near future. Um, but Providence, um, then decided, uh, having had a good look at what was happening and, uh, being interested in just how much enthusiasm there was for the deal, that they would quite like to remain as an investor. But it's the Providence 9 fund, which is a different fund with different investors. Investors in private equity, as you know, are called LPs, limited partners. And so the Providence 9 fund is not the Providence 8 fund. It's a different fund with different investors. And it was the Providence 9 fund, which decided that they would stay in and take about. The exact percentage, isn't quite determined yet. That would take about 40% and Searchlight, um, would take another 40%. So it wasn't Provident staying in and Searchlight acquiring 40%. It was a completely new deal. It was a virgin deal.

Speaker A: Interesting. Thanks for clearing that up. Because I think that some of the chatter around the industry is, uh, or let's say the average layman wouldn't understand. How is it a sale if the current owners are still part of it?

Speaker B: Exactly. It's quite important to stress the Providence 8 fund, which sold, and the Providence 9 fund, which bought are completely different entities. Uh, they happen to be managed by the same company, Providence, but they are completely different entities.

Speaker A: Some suggested co control. Then. Um, how does that work in practice?

Speaker B: Well, they have the same situation at Hive. Of course, Providence, uh, is slightly bigger than Searchlight in Hive, but they've worked together very closely and in fact, very successfully at Hive for quite a long time now. Um, and I imagine we'll see a similar situation.

Speaker A: Um, does that mean the relationship between Hive and Closest Deal might become closer?

Speaker B: No, not at all. No. I mean, it was one of the. One of the most important issues when, uh, the final construction of the deal, um, was realized, um, that there would be no, um, relationship between Hive and Closest Deal. Um, they are completely different companies, completely different cultures. Uh, and, uh, inevitably people will speculate and say, oh, well, you know, um, as indeed people speculated when Providence and Searchlight first invested in Hive, or what about putting the two companies together? But that would be impossible. That would be a real dog's breakfast. They are completely different companies. Thank you.

Speaker A: Um, looking back and you say it's been about 18 years, I think, since closest deal launched, uh, in 2008. What's the overriding quality, do you think that has led to. To its success and growth?

Speaker B: Um, well, it's interesting because, of course, we spent a lot of time talking to a lot of private equity companies, um, about the company. And you could see, you know, you're sitting talking for two or three hours, and you could see the things that, um, that interested, that stimulated, uh, the potential private equity buyers. Yeah, you know, they're looking for value drivers. They're looking for, what is it about this business that's going to drive value, that's going to make it a good investment, or it's going to be more and more profitable. Uh, the first major point, I think, is that Closest still is a very, very simple, very straightforward company. Uh, we only operate in a very small number of verticals. Um, obviously, top end of it. Uh, AI, we have the biggest AI showing data center. We have seven big data center shows. Well, we will have this year because we've got got two launches coming. And, uh, that's about 37, 38% of our business. And then the other big part of the business is where we started, which is medical and healthcare. Um, and, um, that represents a very, very big part of the business. We've got two other parts. One is infrastructure transport technology, which is based on the UKI acquisition. And we have Learning Technologies, HR technologies, which is relatively small, but A very strong growing part of the business. But, uh, if you look at It Overall, uh, IT and medical healthcare is still 75% of our revenue. So we're a very simple company to understand. We don't sort of, we don't slide off sideways into consumer shows or retail shows or all of those other areas of the big groups. Big groups tend to be very wide, if you like. And we're not. We're very simple, very straightforward. Uh, and that's a big plus because it makes you. Makes it easier to understand. It also makes it possible for buyers to make judgments themselves on the sectors you're in. We like these sectors, obviously. The fact that we have these big IT shows with massive data center elements is tremendously appealing. At the moment, we have the biggest AI show in the world. Um, that's not a bad thing at this point. And medical and healthcare is always popular. Medical and healthcare is not growing as fast as it obviously, but it's, but it's solid, it's safe, it's a good place for people to be. That's the most important thing, I think. And also the companies, um, you know, the company continues to grow, um, and it grows and it grows and it grows. And if you look at the information memorandum, it says, you know, we're growing at 15% a year. We'll carry on doing that. And in fact, so far this year, the first four months this year, um, I mean, the revenue year on year has been substantially, uh, more than 15% per annum. So that appeals to people, 36% margin. Uh, and the cash comes in up front. Uh, I mean, in a sense, what's not to like?

Speaker A: And in terms of closest, uh, dealers, the seller, if you like, in this equation.

Speaker B: Yes.

Speaker A: Is it, Is it. You know, people could think it's just about the money, right? Just the highest bidder. When you went through the process, what is it that you're actually looking for in a potential suitor?

Speaker B: Oh, no, I mean, I've done this far too often. Uh, and I, uh, do say too other people who say, what should we look out for? I mean, first and foremost, don't just go for the highest bid. I mean, going for the highest bid is really isn't the way to do it. You've really got to be, uh, in with people that you like and you think will not so much treat you well, but will understand what you are, what you're doing and will support the way you want to grow, the way you want to run the business. That's really, really important. It's a bit too easy to say. We'll just take, uh, the highest bidder. That's not how you should do it. Uh, really, really important to like the people you're dealing with, uh, and to know that they support you. And we were lucky. I mean, we had, in the second round, we had five companies, uh, who were bidding to buy the company. And I think it's fair to say, um, uh, we got. When I say we, I mean the most important person, of course, is Gareth Bohill, who is the CEO. Um, and he and Sam Starr, our cfo, they got on very well with, with pretty well everybody. Uh, and that was very, very good. But we already had the relationship with Providence, and clearly that's been a very successful relationship. Um, and, uh, we also knew Searchlight to an extent. They, they were already an investor in the industry, which is really important. If somebody's already an investor in the industry, you know, that they understand it. Uh, you know, they're not going to suddenly arrive on day one and open their laptops and start asking questions about the industry and suggesting you go off in routes. Um, I'll give you an example. You know, the people that bought Chelsea Football Club, you know, you don't want that. You want to be with people who understand you and that you trust just as much as they trust you. Thank you.

Speaker A: Just moving on to the sort of state in the industry and actually, uh, I guess global, uh, tensions that we're facing. You know, the world feels increasingly unstable with terrorists, trade tensions, regional conflicts. How exposed is the global exhibitions industry to geopolitics? And did that play any role in the timing of the deal and the, uh, type of deal that was done in the end?

Speaker B: Um, very little, actually. I mean, as it happens, closer still, um, has never expanded that much geographically. We have nothing in the Gulf region, for instance. Uh, we only operate obviously in uk, obviously us, France, Germany, Spain, Singapore. Um, uh, we do have one show in China. We do have one showing Korea, which were acquired with uki, but they're run from London. So we've always been quite careful about, um, geographical expansion. Uh, we don't have anything in China, although we are launching a data center show there don't have anything in the Gulf. Uh, therefore, in that sense, um, we weren't directly affected. But it's also true to say that the uncertainty about how Trump's, um, war with Iran will evolve, it doesn't help any process. We're no different from anybody else. I mean, everybody who's investing money, uh, is obviously being a little Bit more cautious than they were maybe three months ago. So, uh, you know, that wasn't a plus. It's a. It's a minus. But a small minus, as it turned out. Sure.

Speaker A: Thank you. And in general, what separates scalable, Scalable event brands from events that maybe stay small? You know, why do some events become market leaders and others stagnate in your experience?

Speaker B: Well, I mean, you come back to people, obviously. Um, you know, people, the people that are running the events, the people that are making decisions. I mean, it helps to have a genius in a company. And, you know, Phil Nelson was our genius. Um, somebody who really, really did know how you drive events forward and how you control the sales process. Um, and Phil's contribution was enormous. I mean, he really was the genius that drove the company forward. I think you've also got to be in the right sector. I mean, we were, we did very well. Our first IT event was, um, a very, very small cloud show. 200 million turnover in 20. Sorry, 200,000 turnover, uh, in 2012. And that was our first excursion into it. But we watched that market quite carefully and started the, uh, data center side of it a couple of years later. Um, and therefore having an intelligence about a market and thinking hard about the market obviously helps. I mean, you know, those shows have grown and grown and grown and grown. And we were in early, um, and, you know, we had people who had really a good understanding of the IT world. Um, you can say the same about medical and health. The very, very first show we ever launched was the London Vet Show. Um, and our vet show portfolio has been enormously successful. I mean, our London Vet Show, I think, is our third biggest show now. And it just keeps growing and growing and growing. And then after a while, you do more and more medical and health care shows. And I think we have 18 medical shows in the UK alone now. So, you know, the, um, infrastructure, you know, you know the landscape. And the more you know the landscape, the more it allows you to, um, to build investment and product in those areas. And again, we've done that very successfully. Matt Butler, um, led that, gradually developing the number of medical and health care shows. We've got absolutely critically. And I said at the start, we're very limited in the sense we have only a very small number of verticals. But because they're small, because you're only looking at two or three areas all the time, you become an expert in those areas, you don't spread yourself wide. It's not like spreading jam across the whole of the piece of bread.

Speaker A: Phil, what's next for you? Uh, are you going to be continuing your role as chairman of closest deal? What's the future hold?

Speaker B: Oh, that's. It's not for me to say. I mean, it's entirely up to the shareholders to decide what they want to do with the business. But, uh, I'm still chairman and a big shareholder in 19. 19 Group, of course. Uh, and 19 is, uh, also doing very, very well. We're very, very pleased. Um, we have the biggest trade show at the NEC now, uh, which I'm very pleased about. And so I think that company continues to grow. Um, so, you know, that's plenty for me to do.

Speaker A: Just talking about 19 briefly, obviously they themselves, I think it was a 200 million pound continuation fund, I think, from Phoenix, was it?

Speaker B: Uh, that's right, yeah.

Speaker A: So, um, tell us about the growth of 19. Are you looking. Do you think you can repeat the same trick again?

Speaker B: I would hate to ever suggest that we can go from what, about 30 million EBITDA to 100 million EBITDAR? I think that would be, um, very ambitious indeed. Although having said that, 19 did not make a profit until 2023. Uh, in 2018, uh, when there was a sort of company reset, uh, and Peter Jones and I raised 10 million from Phoenix. We only had one exhibition at that point. Uh, and so between 2018 and 2023 we didn't make anything at all. But then Covid intervened as well, of course. And then really there was a hell of a lot of planning, a hell of a lot of work, launches, et cetera, et cetera. And suddenly from 23 onwards, um, it accelerated very quickly. But I think it'd be pretty fanciful to say you could go from 30 to 100. On the other hand, uh, in 2020, at the beginning of that year before COVID happened, we were only talking about 22, 23 million EBITDA for, um, closer still back in 2020. So things can happen.

Speaker A: Thank you so much for giving up your time. Um, today. Congratulations on the deal that's announced and everything you've achieved in the industry. And also to close to Steel staff and senior management team. Um, and we look forward to seeing what comes next.

Speaker B: Thanks very much, Dan.