Informa: Where Industries Meet - [Business Breakdowns, EP.192]
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Ridgeline is the entire package and they're experts. We're no longer just a number. When we call service, they know who we are. They completely have our backs. I knew that they were not going to let us fail in this transition. This is Business Breakdowns. Business Breakdowns is a series of conversations with investors and operators diving deep into a single business.

For each business, we explore its history, its business model, its competitive advantages, and what makes it tick. We believe every business has lessons and secrets that investors and operators can learn from, and we are here to bring them to you.

To find more episodes of Breakdowns, check out joincolossus.com. All opinions expressed by hosts and podcast guests are solely their own opinions. Hosts, podcast guests, their employers, or affiliates may maintain positions in the securities discussed in this podcast. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. This is Matt Russell, and today we are breaking down Informa. For me, Informa is the most interesting business in media.

And I'm going to share a bit of extra detail in this intro because I think it's relevant when I make a statement like that.

Everyone I know that runs a media business talks about Informa. No one I know in investing talks about Informa. So when our guest today, Nick Shenton from Artemis, mentioned it as a potential breakdown, I jumped at the opportunity. At its core, Informa is a live events business. And I have this theory that investors are only familiar with bland utilitarian conferences. I was in this camp.

It was only when I stepped out and saw that there was much more happening in other industries. The best industry events are special assets, and they come with a compelling financial model, which Nick details.

Informa also has a publishing business that feels similar to Harvard Business Publishing, which we covered on a different breakdown. And what intrigues me the most is their first-party data efforts in the B2B space. And that's evidenced by the recent TechTarget merger.

You already know this, but a good investment does not mean a good stock. So my flowery commentary is in no way investment advice. Nick and I talked about the risks and investor debate inside the episode. But I hope you enjoy this one. And whether you already know the name or you just start researching it, I would love to hear perspectives on this. You know where to find us. There's links in the show notes to whether it's social handles.

email, whatever it might be. Informa is a very interesting business and I would love to hear more. Now on to the episode.

All right, Nick, excited to have you here to talk about Informa. Many people talk about media businesses, but mostly that's dominated by the Disneys of the world and the large consumer brands that you know of. I came across Informa several years ago and found it to be one of the most fascinating businesses that I could come across just doing our day-to-day work over here at Colossus.

I would love to just start because I don't think it's a household name, particularly for U.S. listeners. Start with just an overview of what Informa is in your words.

Well, first of all, I'd agree with you. I think it is really interesting. We think of Informa as being a connections business. It connects whole industries and supply chains by creating places where they can go to meet. And then when the industries are there, companies and individuals are there to do business. They're there to acquire knowledge, to stay current and build networks. They do this through owning almost 1,000 live events assets. Some you might have heard of.

but most you probably won't because of the business-to-business nature. It's the largest collection of live events or trade fairs in the world. It's two and a half times larger than the number two. They also own one of the world's largest academic publishers, Taylor & Francis, and they generate a substantial amount of original content and unique first-party data that

through a portfolio of around 200 digital B2B media brands, which you may have come across in your line of work. We think this part of the portfolio is kind of expanding and creating option value for the future. So they are the number one portfolio of live events assets for B2B market access that's face-to-face.

And what they're trying to do is recreate that in the digital world. It's all about connecting people and companies with knowledge, information, and one another. And there's a lot of value in that. What do you think are their most well-known events that a listener might be familiar with, if you've just had a few off the top that you would reference?

It depends on your industry focus. If you're in concrete, there's no doubt you will have been to the world of concrete in Las Vegas. Other boat shows, Monaco, Miami, Fort Lauderdale, Cannes Lion has just entered the portfolio.

super return where private equity or alternative investment managers meet. We could go on. As I say, there's almost a thousand of them. They matter for the industry. I think that's the point. We wouldn't know about them and that's fine. But if you're in the industry, those are the one, two, three, four, five days a year that are in your diary that you know you're going to be attending.

Yeah, I think Cannes Lion, for anybody in the marketing world, has quite an aura around it and a recent acquisition here. When you step back and just look at some of the numbers for the business, I think you gave us some great market share references. But how much do they generate in revenue? What is the split? Is the majority of that coming from live events? Can you just put some numbers around the actual business drivers?

First point to note is I'm going to talk in sterling because the business is listed here. It's predominantly an overseas owner. This is an international global business. It's 95% overseas revenue. It just happens to be headquartered in the UK. The UK has got a legacy of being a small open trading nation and Informa really fits with that pattern. Revenue is a bit over 4 billion sterling.

of which around three quarters comes from live B2B events. Another 15% give or take, these are round numbers, is Taylor & Francis, which is a really prestigious asset that's got subscription revenue, really good visibility, high margins. And around 10% is TechTarget, which is their emerging value proposition in B2B digital space. There's some really interesting elements to this. If you take the 75% that's live events,

These are a winner takes most, if not all industry. It really stands out. It's because of the brand equity in the IP. Put it simply, you don't go to the second or third best party, you go to the best party. There's network effects to them, which means you've got deep and broad moats and high and attractive margins.

So group operating profit margins are nudging 30%. The live events assets are 32%, 33% operating margins. Return on capital and cash flow are attractive because it's got low capital intensity and really attractive working capital dynamics. They don't own the venues. It's a really important distinction. We'll come on to discuss that and why we think it's so important. Something I'd mentioned though that wouldn't be apparent on first view of the numbers, and as I say,

We're talking high cash conversion on high operating margins. These are attractive assets. But one of the aspects that we really like is the multiplier effect of these events, because Informa are creating multiples more value than they are monetizing themselves. They work with partners. They're creating value for the venue owners and for local economies. So to put some numbers on it, the Fort Lauderdale International Boat Show just took place. That brings...

It's estimated around $2 billion of economic benefit to the local, regional and state economies. That's from purchases, it's sales taxes. And of course, when you bring 100,000 visitors in, they spend money on hotels, they spend money in restaurants, on retail, transport. If they like it, they'll probably come back on holiday with their families.

That $2 billion of benefit is, we think, around a 40x multiplier on Informer's Take. So if you think about a business which is generating really attractive scale revenue like that, high margins of, call it $50 million, but you're bringing in billions, we really like that as a value proposition.

There's a lot that we've talked about that I'm very excited to get into. You mentioned unique working capital dynamics, the capital light strategy. But before we get there, I do want to cover a bit of the history here because these businesses are very interesting, particularly when you see an M&A history, it's in the DNA. So can you walk us back in time to the launch of Informa and just any of the relevant time periods in its history to arrive where it is today as this market leader?

Informa was founded, created in 1998. It's a relatively young business. Some of the assets have got roots that go back a lot further than that. The first issue of the maritime publication, Lloyd's List, went up on a wall in a coffee house in London about 300 years ago. So there's some pretty historic assets in there. It was a mix of conferences and business publishing when it started.

And to draw a distinction, which some people may know, but many may not, a conference is broadly an event that people pay to attend. A trade fair or exhibition is where exhibitors will pay to display their wares. Slightly different models, but similar dynamics driving attendance. So 2005, there's a merger with Taylor & Francis, which is still in the group and still really important driver of cash flow that supports the capital allocation policies.

The current CEO, Stephen Carter, joined the board as a non-exec in 2010, and he became CEO in 2013. And we think this was an important chapter change. At the time, Informa owned around 10 trade shows, now owns about 600. So in the space of 11 years, there's been significant change. Let's keep in mind that when Stephen became CEO, the business was 15 years old.

And the way they characterize it or the way we can look at it is to say it was a bit of a teenager.

in some senses that had a lot of promise, but hadn't really chosen what it was going to be when it grew up. And what was interesting was that Stephen and the senior leadership have always been very respectful of the entrepreneurship in the business, the creativity. When you're creating content like this that people really, really want to be part of, it takes creativity. So getting that balance, we think was important and also impressive to get process in, but keep the magic.

And Informa knew, even before Stephen became CEO, that exhibitor pays trade shows were very attractive and that there was a need to pivot from some of the more volume-led conferences to specialist, differentiated, knowledge-led events. That was clear.

Stephen helped them carry on that path and really under his leadership, the business has executed excellently. In the space of 10 years, they went from nowhere to the world's leading portfolio of business and trade events.

And in doing so, they've actually acquired businesses along the way that you probably would have backed to be the winners 10 or 11 years ago. But a seriously impressive achievement to get to scale. And now they're at scale that we don't think anyone else has. As we highlighted in the introduction, they're two and a half times bigger than the number two, and it's a very fragmented industry. So the business is now, what would we say, 26 years old.

I'm a bit more experienced than that. Let's say I was not mature at 26. This business is on the path

And you can gauge it in the interactions with the company. They're building confidence, they're building momentum, but they've still got that kind of youthful energy and excitement about the future. It's just that they brought some maturity in how they think and act and execute. And I want to say at the top level, these are serious people. They are very thoughtful, very long-term. What's unique about them is that they're doers as well. And there's a very strong bench below Stephen. So we're talking about chapter changes that

It's all sounding pretty good so far, right? They acquired one of the larger players, UBM, through a merger in 2019. It turns out that wasn't serendipitous timing. To paraphrase Mike Tyson, the industry got punched in the face hard by COVID. Understatement. Yeah, I can't think of a worse thing than COVID. The pandemic was actually good for Informa, which might sound strange to say, but I think in the long run, it's positive for two key reasons. Firstly, the complete absence of face-to-face contact

actually highlighted its worth. So who is still doing pub quizzes on a Friday night online? We're back to face-to-face and you can see it with the industry attendance data. People have come running back to face-to-face events. If the industry was going to be disrupted by Zoom or Teams, it would have happened. And demonstrably, it has not. It's had the ultimate stress test and it's passed. And the second point that's really important is...

The experience of the pandemic forced Informa as a business to really engage with technology.

And before, I wouldn't say that they'd held back on it. They'd invested behind it. But there really was a collective light bulb moment across the business to say, oh, wow, we can't do what we love, which is convene these amazing meeting places face-to-face. We've got to think laterally and go online. And when they did that, they realized, wow, the power that you could create through applying technology. You can enhance the core value proposition in the primary business, but there's also just...

reams and reams of data out there that can be used to create more value. And it also took them on to thinking about this digital layer to interactions, which might just open up a whole new addressable market for them. Now, these are busy people, as we said. They've been very active on capital allocation.

In 2022, there's an important chapter point to highlight, which was the divestiture of some data and information services assets, which went a substantially higher multiple than perhaps people had been anticipating. Maybe the business themselves felt they're very valuable assets, but these were being sold at 27, 28 times EV EBITDA. And they've been able to reinvest that capital

at much lower rates for what we think are very attractive assets. As you talk about buying back shares in the business or buying other events, assets, other content businesses for 10, 12, 14 times EV EBITDA. So we think there was a real key moment in the capital allocation of the business. And to be fair to them, they were brave to do it at a time when things were uncertain, but you get judged by history and history will judge they were some good disposals and good acquisitions. Yeah.

Yeah, you mentioned a really interesting theme there in terms of being a COVID beneficiary over the long run. I think in the moment, there were obvious beneficiaries, direct-to-consumer e-commerce brands. But behind the scenes, there were a lot of incumbents or traditional players that just accelerated a lot of their capital spend towards tech. I think Walmart...

is such a great example of this. And you look at their advertising business and some of the steps that they've made to really lean into more tech forward solutions. And it's been fascinating to watch over there. It sounds very similar in terms of what

has happened at Informa. And I want to get into some of those tech plays because I think it's one of the interesting things lying within the business. But before we do, we touched a little bit on live events. It's still the substantial portion or the main driver of the business. And we got some idea in terms of what

the event could generate. But can we maybe dive deeper into an example in terms of the economics of the events, all the moving parts, just to give some sense? They have so many of these, but if you could sketch out whether it's a specific example or a template case study, whatever you think is best.

First of all, let's split out live events. That's 75% of the business. There's three different parts of it. There's Informa Markets, which is where the exhibitor pays, Informa Connect, where the attendee pays, and then Informa Festivals, which is a mix of lots of different revenue streams, and Canline would be the best example there. If you take Informa Markets, there are some big assets in here and substantial scale,

If you take an example of a new event which has been brought to market in the last few years, that's Leap, an annual tech event in Saudi Arabia. It's a partnership with the Saudi government. That's attracting more than 200,000 attendees across four days.

It's described as the digital Davos by Wired. But let's go into what the economics look like. Again, to come back to this point, these are branded marketplaces for buyers and sellers to meet. It is winner takes most, if not all, because when you're at scale, it's very, very hard to get people away from it. And margins are high for this and other reasons. If we take a typical event, I'm going to say a typical scaled event, around 80% of revenue comes from the exhibitors.

So this is people paying Informa to rent the space, which Informa themselves have rented from a venue. The other 20% is a mix of sponsorship, marketing and advertising, and a bit from attendees. So put some numbers on it. The raw space might be around $50,000. Again, to emphasize, this is a typical hypothetical perspective. Then you might have another $50,000 as the purchaser on stand-related costs.

And you could have $100,000 on travel, hotels, entertainment, which might seem like quite a lot of money, $200,000. I mean, on the other hand, it's non-negotiable. You have to be at these events. And if you're talking about a $500 million revenue business spending 10% of revenue on sales and marketing, it's $200,000 on $50 million. It's 0.4% of the budget.

but it's mission critical. And then when you think about the breakdown, you can also see that the venue owner is generating revenue several times out of Informa. The difference is the return on capital, where Informa don't have the year-round fixed costs that the venue operator does, but it's a partnership. That's really important. We can infer from some disclosure by Informa. And by the way, if you're interested in Informa, I really do think there's some great content

on the investor relations section of the website. There should be, it's a content business, but it nonetheless is very good. You can infer a P&L working backwards that we know that informers live events businesses or the markets within live events, which is about 45 percentage points of revenue. They generate operating profit margins around 31, 32%. That's post group central overheads. So we think it's probably close to 40% underlying.

The direct indirect costs are about equal. So if we work backwards from $100 of revenue, you're talking about gross cash profit of $70. So Informer are selling space at an event for over three times what it costs them to procure and provide it. The venue costs are around $20. The other $10 a venue costs like

electricity, Wi-Fi, agency staff, and you've got marketing and promotion for the event. The other $30 of cost is largely the salaries of these really entrepreneurial people who make the events happen. These are really interesting, really bright people who are close to their industries. They do a lot of late nights, a lot of early starts, a lot of time away from their families. These are really important people. I should note for a business like Leap, that's a partnership with the Saudi government, so there's a non-controlling interest.

But look, we're talking about potentially 40% plus operating margins in unit. Return on capital and cash flow, really interesting. And owning the IP, not the venue, is really important. And the analogy I'd use would be to think of music. So Beyonce could take her brand anywhere in the world and she would fill a stadium. She could go to Dubai, she could go to Singapore, she could go to Tokyo. She'd fill the stadium, but she doesn't need to own it.

It's the same here. And with the venue hire, they pay in installments and generally with at least one that's after the event has taken place, but all the customers must settle their accounts in advance to get access to site. So you've got negative working capital as the business grows. The very strongest shows will have sold out the next year before the current year ends. On average across the portfolio, it's around 40% of the following year's revenue secured at the current show. And there are waiting lists for a lot of shows. So

this pretty good visibility here, this good cash generation, these attractive assets in their characteristics, we think. I think you've laid out the dynamics of what makes events so interesting really well, particularly on the upfront tickets coming in the door, those installment plans, but the

The negative working capital, not needing to own a venue, that's all very interesting. I was just hearing you walk through the model for the event and the venue costs, what goes out the door. There is some element of fixed costs associated with it. So when you see cycles or periods of time, you are bound to have certain slowdowns in particular industries where you'll see a drop in attendance. How much

volatility is there in that operating margin? Obviously, you're seeing everything at the portfolio level. But do you ever see material movements in that operating margin? My assumption was going to be that yes, in certain cycles, you'll see that come down meaningful amounts. But I'm curious if that's actually played out in the numbers. It's a really important question to ask. And it's an astute point to highlight that there is fixed cost in this business. Yes, gross margins are high, but there's quite a lot of fixed cost.

And I would say, eyes wide open, theoretically, at least, there could be more operational gearing on the way down than on the way up in parts of the portfolio. And this is because we can think of the cost base as broadly 50-50, direct, indirect. And of the indirect, almost all of it is people, so relatively fixed. And if you think about what the margin characteristics look like as the business grows, you're

Well, if you take markets, so around 45% of the overall group, 6% top line might be 10% operating profit. Margins are already high.

So margins would go up by about a percentage point per annum from 31% to 32% to 33%, so on. But looking at the downside, it's a fair observation that I think the market has had of these businesses. I don't think we can take COVID as a... Hopefully, we can't take it as a realistic test case. Let's hope that never happens again. But if you were to look at the GFC, you could see that a couple of patterns emerged on the characteristics of the business on the way down.

Again, GFC, I think, is one of the only two times in 60 years when global GDP has been negative. If we take on the trade shows, transaction led, you tend to have better visibility because people are booking quite far in advance. So you can think about repositioning your cost. In the GFC trade show business fell about 8% to 10% on the top line, margins held up because they could manage their costs.

It was on the more delegator pays side of the business. Revenue fell more and margins contracted. And this, if you think about it, when they were small volume conferences, more reliance on delegates than sponsorship revenue, people book a bit later, it's harder to manage your cost. However, I'd say there's quite a few points of mitigation here as to why the group is different now. It's predominantly a trade show business.

If you think about Taylor & Francis at 15% revenue, that is primarily a subscriptions business, so good visibility. TechTarget should be a secular growth business with less cyclicality. And where it's got the content and the events, they're big annual brands. They're not the small one-off volume conferences. So it's a very different portfolio now.

And there's definitely a portfolio diversification effect in their favor, we think. So just really simply, if you were to take natural products, Expo West in Anaheim, and then think about Label Expo in Barcelona, which is for the packaging industry, and then Arab Health in Dubai, they should have different characteristics and different industry cycles to them. High gross profit margins and a good starting point for operating profit helps to mitigate as well.

Exhibitors tend not to cancel trade show attendances. I would say that. I think the number through the whole of COVID was 20 to 25 million pounds of cancellations, even during COVID. So people wanted to come back to these events.

And then to highlight if markets should be manageable, Taylor & Francis, TechTarget should be relatively visible. You're talking about some parts of Connect and some parts of festivals, which combined to 30%, and you're talking about parts of that that might be more cyclical. So I feel like the business would be perhaps a bit less cyclical than...

Yeah. Can you paint a picture of

of what an event looks and feels like for anyone who hasn't been there. I think I did not appreciate what some of these events were like in terms of scale when I was in the finance industry, because most of those events were much different than what Informa is doing. And I attended CanLion several years ago and just thought to myself,

wow, this is a completely different world than what I was used to living in. So it gave me some context. But if you can sketch it out and try to do as best at providing an audio description of a visual experience, that would be helpful. Yeah. And I'd love to hear your perspectives on CanLion as well, because I think it's a really interesting asset. And when I've been researching for this, I'm just thinking we're in the wrong industry, Matt. That was my takeaway. They feel big.

And you feel like you're at the heart of something for that one, two, three, four days, you are in the room where it's happening for that industry. There's nowhere else on the planet that's better than where you are. So it feels like you're part of something. And I can give you an example, my own experience. So one of the questions we ask ourselves as a team when we're assessing the characteristics of a potential investment is,

If you had the chance to take the business private for you and your family and only own that one asset, rather than be in the stock market, would you do it? It's a really good way to gauge your conviction. And I remember distinctly the moment of standing in the middle of an event, which was CPHI Worldwide in Frankfurt. That's for the pharmaceutical industry. And I thought, yeah, I would. I would put my family's wealth into this asset at this price.

Because you can feel it's got critical mass, that it matters.

And that the industry doesn't think of it as informer's event. They think of it as theirs. So as long as you're a respectful owner who cares for the asset and the community that it's serving, it will have long duration and it will grow and grow. That's helpful. And I think you captured it well there. I want to transition a little bit to the other business lines. They're smaller, but they feel relevant. You mentioned around publishing.

Can you go into a bit more detail about what that looks like and just how much you think about that in relation to the business, whether it's an important line with some growth potential there, whether it's kind of just a stalwart as part of the overall portfolio, anything you would add would be helpful. Yeah, I think we see a parallel actually with Relix, which is another business listed in the UK. It's an outstanding business, the world's largest academic publishing business and

And that has been, as you say, a stalwart of cashflow that's enabled them to invest behind their data and analytics and growth businesses. And I kind of see Taylor & Francis as a really prestigious high caliber heritage asset that can perform a similar role in this portfolio. There's parallels to the rest of the business in that it's about the knowledge economy. We know that

There's increased investment globally every year on research and development. We know there are more researchers in the world every year. These are unique assets. You can't replicate them. Taylor & Francis is one of the world's leading academic publishers overall. It's accounting for 15%, 16%, 17% of group revenue. The business model is strong, and that's because it produces content that's user-generated content that it then publishes.

It has a very important role to play in surfacing academic research. Listeners may be familiar with some of the brands like Taylor & Francis itself, Rutledge, CLC Press, Dove Medical. These are all really highly regarded in the industry. There are two models. There's pay-to-read, where the publisher adds value by underwriting the cost of validating, publishing, curating, hosting the content, and they're remunerated in subscription fees.

from libraries. And then there's a new and emerging model, which is leading to growth in the market. And that's pay to publish, where experts are paying a fee to be published. And the publisher is creating value again through validation, curation, hosting the content. And volumes are growing fast here, because as the world gets bigger and bigger and more and more complex, there's more and more ideas that move faster and faster, then the amount of content that's looking to be published is growing. Now, there are some criticisms of the model.

which is that others are generating the content. That content generation is performed by people who are generally publicly financed or financed by endowments, and then it's being repackaged and sold back into communities. Some of the criticisms are understandable. That's kind of publishing. It's just a natural model that emerges in value chains today.

And there's substantial value created by the publisher in a way that just wouldn't work if it was all disparate and spread out online. Also, when we speak to Taylor and Francis, or we speak to Elsevier, which is the Rolex business, they ask time and again,

Do academics want to be paid for this? And they all say no, because it would compromise the peer review model. So we think it's a model that's here to stay. And we also think that there's growth from starting to structurally aggregate and cleanse and scale the data that's there.

and then start to pull insights from it. And there's a lot of interest from the owners of LLMs to get into this space because there's a huge amount of IP sat in this business. And it's coming through around 4% revenue growth and operating margins of over 35%. Yeah, it reminds me quite a bit of Harvard Business Publishing, Harvard's

Harvard Business Review, we did a breakdown on that business. And to your point, much of the content is user-generated. The currency for those authors is the credibility associated with being...

published, whether it's a case study or whether it's an article via Harvard Business Review. So it creates this unique business dynamic. And it sounds like that is what is being captured here as well. And it's always interesting to find those types of unique businesses that can create that type of environment or dynamic where the interests can be aligned, but not in purely monetary ways. I was curious on that business.

Have they shifted materially towards digital versus physical? It's always something that I'm interested in. And is that a relevant talking point? Understanding it's 15% of the business, maybe it's not the most important point. But how have they gone through that transition given it's a legacy brand?

It's a really interesting point to raise. And we see lots of opportunities from technology enabling businesses to create a lot more value for the users. And you get this leverage impact through a knowledge economy. Whereas if you go back 10 years, there were actual fears that technology would disrupt and it would bring in new entrants. And really the key to this is

The data and content is proprietary and unique. The split now for Taylor & Francis is around 60% journals, licenses, databases, and around 40% what they call advanced learning, which is mostly specialist books, some of which are in digital form. Actually, if you go back 10 years, the journal side was already pretty much all digital. And that's because it is just demonstrably a better product for people to use.

So that shifted quite quickly. Within the advanced learning books, it's moved from 90%

print 10% digital to around 50-50. So it's still on a path. If you do the sums, where that takes you to is got 60% that's 100% digital and 40% that's around 50% digital. So overall, Taylor and Francis is around 80% digital. Let's transition to TechTarget, the tech optionality play within their business.

I honestly think what they're doing there might be the most interesting business dynamic in media broadly going on at the moment. I think it's well known by a certain contingent within media, particularly B2B media, but maybe not elsewhere. I don't know what to think about it. So maybe you can provide the audience with just an overview of exactly what they're doing and how to frame the...

option value, the future potential in terms of what they're looking to do with TechTarget? I think maybe we should switch it around and I ask you the questions here, Matt. You're involved in the industry. Let me have a go at it. And then by all means. I can certainly follow up. So there's a parallel here. We feel that this is really interesting because there's a couple of levels that just aren't really widely recognized. The first is what they've created.

in live events of the world's leading portfolio for really attractive assets. That's not really understood. If you trace it back over 10 years, like we have done, you can see they saw the opportunity and they executed really, really well. So they have form. And the parallel is that if 10 years ago they spotted in live events, there was an attractive market with no single player having scale. They've seen the same in digital, we think. And

There is an opportunity here, we believe, in B2B digital services. And they understand how this works because of their experience in live events. TechTarget is a really smart structure to accelerate the journey. And owning 57% of a NASDAQ-listed entity gives you optionality for the future as well. So...

In business-to-business digital services, they're connecting buyers and sellers digitally through data. The point of difference, we think, for this is that they have unique first-party permission data for an audience of over 50 million. Most of the competition, we think, are largely based on third-party data. So this is a key distinction. And they've been acquiring digital media assets in recent years.

so that they can go all the way from, as they call it, from R&D to ROI, so the full value chain. So there are content and media assets like Industry Dive. Their model is to offer access for free in return for content marketing and data and lead generation. Omdia is a specialist research provider, a bit like a mini-gartner.

That's a subscription business that targets C-suite users. That's really important because it gives you an insight into buyer intent and topics of interest. Both of those are really key. Netline is a platform that offers services to other companies to manage their data in return for using it for lead generation. So what they've created here is a collection of content assets, which again, looks, if not unique, pretty rare to have those all together.

And really deeply understanding the intent behind the interactions is what matters because there's a whole different ROI on offer if you know that somebody is looking to transact. You can see this by leveraging digital for the live events as well that

If somebody is going to an event in Dubai from a hospital and they're booked in for meetings to look at CAT scanners, you know that they're going to be interested. That's valuable to someone, this permission data. So this is a large market. It should grow at a multiple of GDP. They're starting in enterprise software. I don't know if they'll succeed.

As I say, they're serious people. They've spent a long time thinking about this. They've got a decent track record. So there's optionality. I just can't help but feel as well that

They'll be well positioned to transfer the knowledge on digital lead generation across other specialisms over time. And that's really quite different. I think you hit it incredibly well there. I think the way that you can think about first party data historically is the two best examples in the world with Facebook and mostly via Instagram and Google. Yeah.

And those are two platforms where when you sign up, you give them all of your information. You remain logged in and they follow exactly what you're following. And they can see your behaviors, your intent, your interests, and they will serve you mostly consumer-based ads.

Now, that has never really been possible with the business world. But you can imagine if you sell some type of enterprise software solution specifically made for the transportation industry, and you know that somebody was searching for a

enterprise software solution for the transportation industry and they had a large budget, that would be an insanely valuable lead to have. So it's a concept based on everything that they've gathered in the amount of first party data that they have from all of the publishers and different resources that they've gathered. It just from a...

very, very high level view seems like an incredibly interesting option, as you mentioned, that exists within the business and where it goes from here, we will see. And I think, Matt, we're probably two of the only people talking about it at the moment, which might tell you something as well in the investment community. Yes, I think that's right. In the investment community, that's probably right. In the media community, I think it has gotten some attention or quite a bit of intrigue and interest.

So when you consolidate everything, I think you mentioned at the top of the episode, $4 billion sterling in revenues. Can you put some numbers again around just whatever net income, whether that's a net income margin, whether it's a free cash flow yield, any other numbers that you could highlight that really tell the story of what the consolidated business looks like?

Yeah, absolutely. Very happy to. Look, I think this is interesting for us to take something of a published consensus for next year. We're always looking ahead. 4.1 billion of revenue is coming through about 1.2 billion of operating profit. And that's dropping through to in the region of 750 million net income.

It's very high cash conversion. So you say, "All right, that's interesting. I wonder what that's valued at." No comment on the valuation, but the market cap is about 10 billion sterling and the enterprise value is about 12. So there's a couple of things really stand out. Firstly, this is a prospective free cash flow yield of about 7%, which in our money is pretty attractive. And also when you think about valuation, something really interesting happening here.

We know that there are people in the industry who see the value of live events and we can see transaction multiples. And for the best assets, they are transacting at 15, 16 times EV EBITDA. Now, the whole of the informant portfolio is not necessarily the ultimate highest quality, but overall, it's the highest quality portfolio.

in the world. So we're talking about a group that's trading about 10 times EV EBITDA. So it's at a discount to the market valuation of its assets, which to us in some senses doesn't make that much sense. When you think about that free cash flow number, the 7% yield, how much volatility is there over time? And I know M&A

is part of the DNA. So it's a little bit, I would say, if you can back out M&A when thinking about that, does that swing around quite a bit? Are there periods of time where there's large capital outlays or anything else that would result in volatility around it? I'd say the portfolio gives you protection against it. And here's an important point. I think the capital structure of having permanent equity for this model is really important.

Because if you owned one or two assets in a PE structure and you put leverage into them and you're trying to scale it up, it could be quite hard to do that. And we know that you've got to think about your exit multiples. But if you've got this permanent equity, you can build the portfolio at scale and benefit from the diversification. And I'm not saying it won't be economically sensitive. It will. But you'd have to see a protracted global slowdown again.

There's nothing more volatile about their portfolio than any other portfolio. And arguably, it should be less volatile is what I'm hearing. Yeah, I think let's talk about some risks, because it's important to consider downside. As I say, I think the natural or we feel the natural tendency is

trend in this business is to benefit from global wealth. It's an industry that's grown at 5%. Historically, Informa's assets will do better than that. So you might miss a year of growth. In extremis, but you've got growth. But I have to say, look, let's be realistic about possible concerns. We know there is a risk of some kind of situation in the South China Seas. And Informa does have exposure to China. It's not

enormous, but it's enough that it would be in a basket of people concerned were there to be some kind of military action around Taiwan. That said, I mean, look at the companies who are getting their chips from Taiwan. Look at the supply chains in China. It's possible that there could be a rerun of Russia with sanctions if something were to happen. I think we'd probably have bigger concerns than informers' low single-digit percentage exposure. How about in terms of

supply within the industry. It's at least in the world that I live in, there are a lot more events happening. And I think post-COVID, there was pent up demand that is being met in a variety of different ways. But there's no shortage now of events and conferences. And people have caught on that these can be interesting business models. How do you just think about that as a risk for Informa?

Yeah, I think it's a fair point that there's a recognition that there's some really interesting potential in this space and that there could be some capital behind it. We think it's a really important moat though. And that is that the assets are unique, so they tend not to compete with one another. And it is really, really hard to compete with an incumbent. The reason they're unique is that they're focused on specific industries. So let me give you a slightly flippant example, but it might frame it.

What are the chances that Blackstone say, look, Informa, we love super return in Berlin where private equity gets together, but this year we just fancy a world of concrete in Las Vegas. It doesn't happen that you switch between industries like that. And then to take liquidity away from those two franchises is incredibly hard.

So, in some ways, I'd say it's a possible opportunity because Informa is the natural consolidator and scaler of these. And I'm happy to talk about the business model and what we think is emerging on the importance of scale. I'd also say there's an important point on the supply side, which is there are more venues coming on. And if I can slightly digress, venues need events to fill them up.

There's a great analogy which Dom from Business Breakdowns highlighted. I think it really works very well. F1, my goodness, what a job Liberty have done with Formula One. It's absolutely fantastic and amazing product. They used to have to pay to rent tracks. Formula One does not own the race tracks. But it's such an interesting, valuable proposition that countries around the world have made it a strategic objective to get an F1 race.

You can see that in the Middle East, you can see it in the Far East, you can see it in Azerbaijan. And there's something similar on the supply side that's benefiting Informa because when you've got governments that are farsighted, they can see the value of this. And it's actually core to a lot of tourism strategies, which is to use the MICE acronym. I'll forget the various parts of it. Maybe I'll come back to that. But this is about meetings, incentives, conferences and exhibitions.

And the reason it's so valuable is you're bringing in people who are in charge of budgets, who are paid well to visit a country, to go to a trade fair or event. And if you do a good job, they'll return as tourists and they'll explore more and they might bring their families. It puts you on the map.

and there's a definite multiplier effect. I think I'd actually almost look at it the other way and say, yeah, there might be some new events emerging. There always will be. Maybe Informa could consolidate some of those

But on the supply side, there's a lot of great venues coming on stream and Informa are the natural partner for a lot of these farsighted governments. And Saudi and the Emirates would be pretty good examples of that. You mentioned scale. I was going to revisit the M&A strategy, which I think those things go hand in hand. Can you talk through a bit about the M&A strategy? I thought...

It was interesting to see they have divested businesses in the past. And that gives me some idea in terms of thinking about capital allocation and just creating shareholder value. Walk through how you would frame the M&A playbook, any forward outlook for where you would expect them to be active, and then why it's a relevant strategy when it comes to scale, as you mentioned in the previous answer.

The great points, Matt, there's a really good analog that we can use here and that's LVMH. And

The reason I think it's an analogue is not just to reference it against an amazing business, but I do think there are parallels with the luxury industry because you're talking about high brand value, high IP, long duration assets, which are cash generative. And then when you own those, you're going to generate cash and you can redeploy that cash to buy more of them. And that's what's so intriguing is that Informa have seen that and done that and no one else has really. And they're now of a scale

where it would be quite hard to compete. The deals they've been doing, Tarsus and Essential, these are big portfolios of assets. They're able to do them and almost digest them as they carry on. It hasn't been a huge process. They've also built up capability. So there's capability on strategy, category allocation and exposure is so important. Simplest way I can put it is, would you rather be long-suffering

cybersecurity or cigarettes. You've got to find the right categories with fragmented supply chains so that you're not dealing with a handful of customers. They've allocated capital well there to understand that. And they've built up a muscle memory. And this is a pattern we've seen across other businesses and other investors will have seen is that I'm not saying you become a roll-up machine, but you get match fit.

and you build up your treasury departments, you build up your finance departments, your strategy, and you can start to do these deals well. I think they've earned trust of investors by not just acquiring, but also selling. That's a really important point you make. I would say the culture of businesses is something that really matters to us. And there's a key insight to the culture of this business that they...

work incredibly hard to be good sellers, not just at the price, but to structure the deal to make sure that there's value creation. They don't just say, right, we're selling this asset, no investment, let's put it in the out tray. I think that speaks volumes of them. And then this importance of scale on, we've mentioned the portfolio effect. We think we are seeing a trend, a very strong trend of technology pushing industries to scale.

And it's pretty straightforward if you think about it. If you own one event asset and you're competing against someone who owns a thousand,

The business with 1,000 has just got a much bigger revenue base to amortize tech spend across. I'm not saying they're amazing at technology, but they should be better, and we believe they are better. And we're seeing this in other industries. We think we're seeing it in high street retail with Next in the UK. That's becoming a portfolio of brands. And when we look at the opportunities to create more value through surfacing data,

having a larger tech stack that's been well invested for a number of years, it should be a benefit. And we think it should be a competitive advantage against smaller players. Just thinking about the growth model,

We've talked about M&A. When you think about organic growth, the top line, what does that look like? Do you have any framework for thinking about from year to year, this is what the business could grow? Do they need to add new events to grow? How do you frame that in your own mind and how does the business frame it?

I think we're in equities to find advantaged companies that are going to grow. And to do that, you need to find businesses that have got opportunities to grow more than global nominal GDP and do it profitably. I think this is an industry which has a good correlation to rising wealth levels. That's got to be a starting point, hasn't it, for an investment case? And there's a number of drivers that are leading to the industry overall growing 5%, 6%.

And we'd hope Informa would match that and do better. So if we think about the industry drivers before Informa specifics, technology is driving increased complexity. That's a good thing for the knowledge economy. We've got shifting trade patterns. Innovation will continue to move at a pace thanks to technology. And technology

I think really the increasing digitization of everything that Informa do is creating more value and it's creating more demand for the high quality live experiences. There's also a really interesting driver, which is there's an increased supply of venues around the world, as we discussed, and the venues need filling.

And these venues will work in partnership with businesses like Informa. There's a growing demand from the venue side. So if you think the industry grows 4%, 5% plus, Informa should do better overall. Taylor & Francis is probably around a 4% grower.

And tech target, I think we'd probably all be a bit disappointed if it was unable to grow double digits. But I think they'd be disappointed with that as an outcome. So you've got decent top line revenue drivers. If you look at the company specifics, I think it's really interesting that overall, as we said, they're creating multiples more value than they're extracting. They're unique assets. In contrast to a lot of other industries, I don't think they went hard on pricing.

on reopening from COVID. We've all felt that impact of companies really jacking up prices. I don't think the events industry did because it was in a weaker position. And then something that's really important is the quality of the product is improving significantly because of the use of data and digital. So the ROI is going up and that's supportive on a mixed side of yield increases.

And as we say on volumes, there'll be more attendees. You can have geographical expansion, like taking money 2020 to the least, and then spin-offs out of events. So there's a number of factors that should be supportive of pretty strong long-term top-line compounding. Do they need to acquire to add on to this? No, but they can. They're a natural owner of these assets because they've built the platform in the industry.

I think they'd feel that they could add capability and value to any events business they acquired on the technology side or the geographic expansion. Although again, let's say this is not an industry with loads of cost synergies on M&A. So you have to get there through revenue growth. But when you're bringing assets in and...

and governments are calling you saying, what events do you have for us to put us on the map? That's quite a good place to be. This has been an excellent conversation. Obviously, it's a name that's very near and dear to my heart in terms of how I think about things in the industry. We close these conversations out, as you know, with lessons that you can pull away from looking at this as an investment. So Nick, what lessons stand out to you about Informa that you could potentially apply elsewhere?

Could I give two aspects to it? I guess it's lessons that we see from a business perspective and maybe some lessons I've taken as an investment perspective. Absolutely. Just try and give a bit of value if I can. From the business perspective, look, it's why the job we do is so interesting because you're always learning. It's the beauty of the job. And then you can spot patterns and take them to other businesses. I'd say the big one to focus on is really how did they do it?

How did they do it when they were almost a volume conference business in 2013? And in 2024, they're by orders of magnitude, the biggest live events business in the world. And they've got this fantastic heritage, academic publishing asset, and then the optionality of TechTarget.

So when I think about that, or the lessons I take from it, I'd say they kept their eyes on the prize. They could see the opportunity and they got this balance just right of knowing what they wanted to achieve and putting structure behind it, but keeping the magic in the business that these are creative people. And they took their time.

They leveled up. They did the first deal, which I guess would have been Hanley Wood, then Penton, then onto UBM, and then suddenly you're swallowing Tarsus and Essential. They were very strong on capital allocation. I imagine they looked at a lot of deals and walked away from a lot of them on price or quality, so things we'd never know about. But I think they were quite disciplined.

on the right assets. Not everything is perfect, but for the most part, you'd score them pretty highly on having bought good assets with growth in the right areas. So their execution and strategy in doing their thinking and doing

and taking their time is kind of this compounding effect that gets you to where you want to go. And I've been really impressed by that. And they think of it as being a little big company. So big enough to have scale, to matter, to have brands, to have reach, to have some kind of structure, but small enough that you're still entrepreneurial. It's so hard in business to get that balance, but they've been really focused on it and they've done a pretty good job on it. And on the capital allocation,

Yeah, it's this buying and selling well. I think everyone will have read Outsiders. If they haven't, you should read it. It just highlights the importance of capital allocation. And to have sold at 28 times EV EBITDA for an asset that people thought was worth 10 or 11 times, having put a bit of investment back into it, and then reinvesting that is really impressive.

And as we know, when you're a business that's growing, and let's say you've got about a 40% payout ratio, 60% retention ratio, by the end of 11 or 12 years, the CEO is allocated almost, I think, around 70%.

of the business's capital. So it's that compounding effects of capital allocation, which is really important. So they've done it really well. And then of course, the most obvious one that we all know, but not everyone does, is just being incredibly close to customers. I would say really understanding the industry, making the industry feel like these are their assets, not treating them. This is all about relationships. I'm in business for relationships. They're what are rewarding, not the transactions.

And when you make it about relationships, there's duration to it and quality to it. And they've done that really well. On the investment side, a couple of things stand out to us. It's just the value of underappreciated change. When you really take the time to understand the value creation of a business and how the portfolio is shifting, and you take a longer time horizon, you can spot these patterns as has happened with LSEG and Relics and

Walter's Cluer and now may be happening with Informa. So yeah, underappreciated change might be one of the headlines here. And then, as we mentioned before, this is the way technology is driving industries to scale. It really is important to be large and to leverage your proprietary data advantage and then the tech advantage. So yes, a huge number of lessons, a really enjoyable journey. Excellent.

Thank you very much for sharing the knowledge. And this is an interesting one to study, but also an interesting one to watch going forward. Appreciate you joining us again, Nick. Thanks for having me, Matt. To find more episodes of Breakdowns ranging from Costco to Visa to Moderna, or to sign up for our weekly summary, check out joincolossus.com. That's J-O-I-N-C-O-L-O-S-S-U-S dot com.

We hope you enjoyed the episode. Next, stay tuned for our conversation with Katie Ellenberg, Head of Investment Operations and Portfolio Administration at Geneva Capital Management. Katie gets into detail about her experience with today's sponsor, Ridgeline, and how she benefits the most from their offering. To learn more about Ridgeline, make sure to click the link in the show notes. Katie, begin by just describing Ridgeline.

what it is that you are focused on at Geneva to make things work as well as they possibly can on the investment side. I am the head of investment operations and portfolio administration here at Geneva Capital. And my focus is on providing the best support for the firm, for the investment team. Can you just describe what Geneva does? We are an independent investment advisor, currently about over $6 billion in assets under management. We

We specialize in U.S. small and mid-cap growth stocks. So you've got some investors at the high end, they want to buy and sell stuff. And you've got all sorts of investors whose money you've collected in different ways, I'm sure. Everything in between, I'm interested in. What are the eras of how you solved this challenge of building the infrastructure for the investors? We are using our previous provider for over 30 years. They've done very well for us. We had the entire suite of products.

From the portfolio accounting to trade order management, reporting, the reconciliation features, with being on our current system for 30 years, I didn't think that we would ever be able to switch to anything else. So it wasn't even in my mind. Andy, our head trader, suggested that I meet with Ridgeline. He got a call from Nick Shea, who

who works with Ridgeline and neither Andy or I heard of Ridgeline. And I really did it more as a favor to Andy, not because I was really interested in meeting them. We just moved into our office. We didn't have any furniture because we just moved locations. And so I agreed to meet with them in the downstairs cafeteria. And I thought, okay, this will be perfect for a short meeting. Honestly, Patrick, I didn't even dress up. I was in jeans. I had my hair thrown up. I completely was doing this.

as a favor. I go downstairs in the cafeteria and I think I'm meeting with Nick and in walks two other people with him, Jack and Allie. And I'm like,

Now there's three of them. What am I getting myself into? Really, my intention was to make it quick. And they started off right away by introducing their company, but who they were hiring. And that caught my attention. They were pretty much putting in place a dream team of technical experts to develop this whole software system, bringing in people from Charles River and Faxit, Bloomberg. And I thought, how brilliant is that to bring in the best of the best

So then they started talking about this single source of data. And I was like, what in the world? I couldn't even conceptualize that because I'm so used to all of these different systems and these different modules that sit on top of each other. And so I wanted to hear more about that. As I was meeting with a lot of the other vendors, they always gave me this very high level sales pitch. Oh, transition to our company, it's going to be so easy, etc.,

Well, I knew 30 years of data was not going to be an easy transition. And so I like to give them challenging questions right away, which oftentimes in most cases, the other vendors couldn't even answer those details. So

So I thought, okay, I'm going to try the same approach with Ridgeline. And I asked them a question about our security master file. And it was Allie right away who answered my question with such expertise. And she knew right away that I was talking about these dot old securities and told me how they would solve for that. So for the first time when I met Ridgeline, it was the first company that I walked back to my office and I made a note and I said, now this is a company to watch for.

So we did go ahead and we renewed our contract for a couple of years with our vendor. When they had merged in with a larger company, we had noticed a decrease in our service. I knew that we wanted better service.

The same time, Nick was keeping in touch with me and telling me updates with Ridgeline. So they invited me to Basecamp. And I'll tell you that that is where I really made up my mind with which direction I wanted to go. And it was then after I left that conference where I felt that comfort and knowing that, okay, I think that these guys...

really could solve for something for the future. They were solving for all of the critical tasks that I needed, completely intrigued and impressed by everything that they had to offer. My three favorite aspects, obviously it is that single source data. I would have to mention the AI capabilities yet to come. Client portal, that's something that we haven't had before. That's going to just further make things efficient for our quarter-end processing

But on the other side of it, it's the fact that we've built these relationships with the Ridgeline team. I mean, they're experts. We're no longer just a number. When we call service, they know who we are. They completely have our backs.

I knew that they were not going to let us fail in this transition. We're able to now wish further than what we've ever been able to do before. Now we can really start thinking out of the box with where can we take this? Ridgeline is the entire package. So when I was looking at other companies, they could only solve for part of what we had and part of what we needed.

Ridgeline is the entire package. And it's more than that, in that, again, it's built for the entire firm and not just operational. The Ridgeline team has become family to us.