The private equity firm patiently canvassed the post-pandemic conferences and exhibitions opportunity until a belated but inevitable rebound in China started to come into focus

Advent International had been looking at the events and exhibitions space since before the pandemic when its interest piqued around expectations of a post-lockdown rebound. China was identified as a key recovering market with a scarcity of sizeable players. Meanwhile, awareness around the opportunity set was rising, adding pressure around competition and valuations.

Still, Advent took its time. The private equity firm didn’t meet with VNU Exhibitions Asia, one of the leading players in China, until November 2022. It then spent more than a year in due diligence before confirming acquisition of the business earlier this month for an undisclosed sum.

The luxury of time in an attractive, newly unshackled segment can be explained to some extent by depressed sentiment for China in general and the fact that VNU simply did not need outside capital. When the company’s owner, Dutch events organizer Royal Jaarbeurs, began a spinout process in 2022, Advent moved quickly to establish an exclusive working relationship.

“Not only were we able to cover diligence thoroughly, we were also able to work on the business plan,” said Irene Liu, a managing director at Advent. “Where they see opportunities, what they can do in the future, potential collaboration partnerships ­ – all these topics were discussed during a long proprietary period before we signed a deal.”

Advent took out Jaarbeurs’ entire 70% position in VNU via its largest-ever global private equity fund, GPE X, which closed on USD 25bn in May 2022 with plans to expand investment activity in Greater China. David Zhong, VNU’s founder, reportedly holds the remaining 30%. Jaarbeurs will continue to co-organize some events with the company.

Much of the thesis is based on the post-COVID rebound. Advent observed that China’s events industry was about one year behind that of the US in terms of getting back to full strength. At the same time, the country was seen as relatively underpenetrated and experiencing rising demand.

Survey work by Advent revealed an industry ripe for expansion. It found that, despite the pandemic, companies consistently reported a high return on investment (ROI) from exhibiting at trade shows and leveraging the experience to build relationships, showcase products, and collect intel.

“Exhibitions, particularly for the leading players, is a network effects industry, where the business cycle reinforces itself,” Liu said, adding that VNU enjoyed a “record year” in 2023.

“The more visitors you have for a show, the higher the ROI you will be able to provide to your exhibitors, the customers. Therefore, the increased visitor count attracts more exhibitors, which in turn leads to more visitors. It’s a virtuous cycle with a clear scale economy and barriers to entry for the leading players.”

VNU was founded in the mid-1990s and acquired by Jaarbeurs in the early 2000s. It promotes events in four categories: pet care, construction, 3D printing, and agriculture. The flagship event, Pet Fair Asia, was launched in 1997 and has emerged as an industry leader, attracting some 24,000 brands and 350,000 visitors in 2023 alone.

Operations encompass 10 cities in China, which host about 20 exhibitions and conferences a year. Helping overseas companies enter China is a significant part of the value proposition, although most participating businesses are domestic. A smattering of overseas activity – notably including Pet Fair South-East Asia – is planned to be expanded under the name Globus Events.

The main value creation effort will focus on the offering in the company’s existing four verticals. To some extent, this will involve building out the digital aspects of conferencing that came to the fore during the pandemic – but always with an understanding that this industry is essentially all about marketing. Brand recognition and personal connections are everything.

“You need to have a strong IP because if it’s a mature space. When there are already established players in certain industries, it’s difficult to break in,” Liu said. “Exhibitions is also a people business. It’s very detail-oriented, and you have to be innovative and continuously deliver high value to your customers. The team is very important.”