Cypress Adds Ad Arm To Carnie Biz –


Target: Vacation Connections

Buyer: Cypress Group’s Stone Canyon Entertainment


Platform: North American Midway Entertainment LLC

Price: Under $100 million

Fund: Cypress Merchant Banking Partners II LP (1999)


Financial Advisors: Seller: Petsky Prunier; Buyer: The

Jordan Edmiston Group

Legal Advisors: Seller: Reed Smith; Buyer: Dow, Lohnes & Albertson

Get your candy, here! Popcorn! Majority stake!

The Cypress Group is hoping its consolidation of the carnival industry won’t be a roller coaster ride. The private equity firm has just added on what it thinks is a key element to its strategy-the alternative media advertising company, Vacation Connections.

Cypress teamed up in 2004 with Frederic Rosen-known for rolling up the ticket industry to create Ticketmaster Corp.-to form Stone Canyon Entertainment Corp. Under the Stone Canyon name Cypress Group and Rosen have created a platform of traveling carnivals called North American Midway Entertainment LLC. Already, Stone Canyon says Midway has the largest market share in the carnival industry-an industry with 150 million paying customers annually. Midway already boasts 20 million visitors at its 140 events, which include 12 of the top 50 fairs in North America in 17 states. The Indiana state fair alone gets 850,000 attendees, which Rosen is quick to note is more than an entire season of home games attendance for an NFL team.

This leads to Stone Canyon’s most recent investment: a majority stake in Vacation Connections. As it is now, the $3 billion-plus nation-wide carnival business has very little advertising. Vacation Connections could change that. The company builds multi-pronged advertising approaches, which may include, for example, placing a product in a hotel room and a banner with the product’s brand name in the hotel lobby. Vacation Connection’s client list includes Gillette, Unilever, Palmolive, Wrigley, Nestle and Dial.

Rosen said that from the beginning, Stone Canyon had an interest in bringing more advertising to the carnivals, but buying a firm like Vacation Connections wasn’t necessarily on the agenda. Rosen said, “clearly we’ve embarked on an ambitious plan.”

Responding to a question about the uniqueness of the carnival industry, which no other private equity firms seem to be taking an interest in, Rosen said, “I’m not saying we’ll always be alone, but it struck us as an interesting opportunity. It’s a business that everyone sees and nobody notices. But it is a business first and foremost.”

The price on the deal was undisclosed, but a source familiar with the deal said it was worth under $100 million and that all of Stone Canyon’s acquisitions for Midway have been in the tens of millions.

There was no auction for Vacation Connections, which was advised by Sanjay Chadda and John Prunier of Petsky Prunier. The Jordan Edmiston Group, which competed with Petsky Prunier for the sell-side assignment, immediately brought in Cypress to look at the company. Cypress made a good impression from the start. Although Petsky Prunier had built a book for the company, it was never needed, said Chadda.

There have been a few deals in the alternative advertising space, which is defined as marketing companies that do not focus on television, print or radio. Others deals in the space include, EOS’s recap of Promo Works LLC in December and New Mountain Capital buying MailSouth Inc. last year.

The sale of Vacation Connections “is just another deal that shows the trend of advertising and media dollars moving in the direction of specialty media as opposed to general advertising,” said Chadda.

Looking forward, there are about 500 operators in the carnival market, said one source familiar with the industry. Cypress is probably talking to about a half dozen at any one time and the targets vary widely in suitability for acquisition, said the source.

For the moment, there are not many-if any-other private equity firms competing with for assets in the industry, said the source. “It takes a long time to crack into the industry. It’s all family oriented, passed from generation to generation,” he said. “When I first heard about it I thought, You’ve got to be kidding me,'” said the source.

However, digging into the numbers, the industry appears more and more ripe for a roll up and Vacation Connections adds a lot to the value of Midway, said the source. “In a fairground, there’s no advertising. It’s like walking into an event conducted in the 1920s and 1930s.”