In searching for overlooked opportunities, it’s good to poke around for companies that don’t fit typical industries like technology, finance or healthcare. Companies that don’t make it onto the Wall Street radar can offer good value.

Emerald Expositions Events is in the business of organizing and executing trade shows. It is just not a business you come across everyday. It would be hard to find one more boring. So, it fits the description of an offbeat business with perfection.

Trade Shows Are Huge

According to the company, approximately 9,400 trade shows are held each year in the United States with the majority owned by industry associations (e.g. American Medical Association).

In the modern era of online buying and mobile messaging, trade shows might appear to have lost their relevance. No so, trade shows still provided the best means for industry participants to get exposure to products and service experts, to communicate with other industry members and get their questions addressed.

It is where willing buyers and sellers come together to do massive amounts of business. There is nothing boring about that.

It all adds up to $13.5 billion a year industry with EEX accounting for just 2% of the total. The industry is highly fragmented with market concentration of the top four companies representing just a few percent.

Typically the number of trade shows held each year varies by industry vertical. Technology, for example has the most with camping gear among the least. Thus the level of competition each trade shows faces varies by industry vertical.

Based on Stax’ market research, EEX estimates approximately 95% of their revenues are generated in industry verticals where EEX offers the leading trade show.

So What Makes EEX Standout

Emerald is the result of a series of acquisitions dating back to 2013. Since then the company has made 13 acquisitions for a total sum of $530 million. If you are looking for investment opportunities in industry rollups, EEX might be worth a look.
Based on Net Square Feet (NSF), EEX is the largest operator of business-to-business (“B2B”) trade shows in the United States. Their first trade shows date back over 110 years.

EEX currently operates more than 50 trade shows, including 31 of the top 250 trade shows in the country as ranked by TSNN, as well as numerous other events. In 2016, EEX events connected over 500,000 global attendees and exhibitors and occupied over 6.5 million NSF of exhibition space.

Based on a $6 million average from each show EEX beats the industry average by a substantial margin.

EEX claims that their shows are frequently the largest and most well attended in their respective industry verticals, this is a key to attracting high-quality attendees, including those who have the authority to make purchasing decisions on the spot.

Their portfolio of trade shows is balanced and diversified across industry sectors and customers.

Leveraged Balance Sheet

On April 28th, underwriters lead by Barclays Capital, Merrill Lynch and Goldman Sachs took EEX public at $17. This was below the initial filing range of $18-$20. Since then the shares have risen to more than $20.

Net proceeds to the company of about $95 million went to reduce the sizable $687 million in debt. Continued high debt raises questions by analysts as to how the balance sheet will be able to support future rapid growth.

Another issue to consider, sifting through its acquisitions, investors are challenged to extract a solid calculation of how much of the company’s growth has been internally generated.

So is EEX going to turn out to be a successful rollup or just another 2017 IPO? Getting the debt further reduced, it seems, would add a lot of sizzle to story. However, at least with a publically traded equity, EEX can offer stock to lure acquisition prospects. As long as the price at least remains near current levels, EEX growth strategy has a chance.