Did Emerald ‘Overpay’ for the Iconic Tradeshow?
It was only just a matter of months ago, in January 2017, that we learned that CEDIA had sold off their trademark show to Emerald Expositions, the biggest B-to-B tradeshow promoter in North America. This news came completely out of the blue, with no forewarning to members of the Association.
When the sale was announced by the Association, the very last line of their notice was: “The financial terms of the agreement were not disclosed.” This lack of disclosure makes it virtually impossible for any loyal supportive CEDIA member to evaluate this major decision – selling off the single largest revenue generator for the Association – by the group management.
Now, we have a major piece of the puzzle, the purchase price…
When CEDIA first announced this sale, the reaction was one of surprise…and even shock. The centerpiece of the Association, its annual show, was no longer part of the world of CEDIA, but rather is now owned by a disconnected, for-profit, third-party show promoter.
Many members had questions, not the least of which was, why? Also, members questioned the wisdom of the decision as many understood the importance the show represented as the key element in the Association’s revenues.
No One Has Been More Diligent
No one was more diligent than¹ Strata-gee in attempting to learn the details of this important transaction, to better understand the ongoing ramifications for CEDIA’s future. But repeatedly, top Association executives such as the CEO and the Chairman of the Board, refused to release details, saying Emerald had insisted on a non-disclosure agreement (NDA) as part of their purchase contract.
In a meeting with Emerald Exhibitions executive Brianna Morris, we requested that the company release the details of this transaction – or rescind the NDA to allow CEDIA to release the details – in the name of transparency, and to allow members to retroactively evaluate this decision by their Association management.
We are waiting to hear back from Emerald on this request.
The Price Emerald Paid
However, since its purchase of the CEDIA show, Emerald Expositions has taken their company public. In reviewing the company’s filings with the Securities and Exchange Commission, we discovered that Emerald paid CEDIA handsomely for their show.
The total purchase price Emerald paid to CEDIA for their show was $36 million, in an all-cash transaction that includes $1.2 million for a “negative working capital adjustment.”
We are not experts in tradeshow valuations, but that purchase price seems high – nearly six times gross revenue and nine times gross profits for the event. In CEDIA’s 2015 IRS Form 990 filing, the Association revealed that revenues from the show were $6,453,992, while costs associated with the event were listed as $2,454,104 for a profit of about $4 million.
There are said to be further provisions to the transaction with Emerald that, we are told, make the deal even sweeter for the Association. However, we saw no such disclosure by Emerald and are otherwise unable to confirm this rumor. We will continue to attempt to determine all pertinent elements of this deal to help members digest its impact.
But on the face of it, CEDIA seems to have been extremely well paid to sell off their show. The question is, why wasn’t this figure shared with members, when they knew it would become a matter of public record?
1. Fixed a typographical error from “that” to “than.” THANKS to Adam Sohmer for catching that!