RBR + TVBR INFOCUS
Veteran media broker Glenn Serafin is highly regarded for his knowledge of radio and television station transactions … and values.
Before forming Tampa Bay-based Serafin Bros in 1993, Glenn spent eight years specializing in domestic broadcast brokerage and finance as a VP at international investment banking firm Communications Equity Associates.
Before joining CEA in 1985, he spent 10 years in news, sales and management at Associated Press. He departed AP as its national broadcast sales manager, a post which introduced him to thousands of station owners and operators.
He was elected President of the National Association of Media Brokers in 2013.
In an interview with RBR + TVBR, Serafin offers his thoughts on the next 12 months for radio and TV stations, and where the industry has come since the mid-point of President Reagan’s second term in office.
RBR + TVBR: What is your take on the year ahead for media brokers, and where radio and TV transactions are set to go?
GLENN SERAFIN: In general, we are coming off a very soft year for both radio and TV — except for some opportunistic radio deals like the Greater Media sale to Beasley, which was a terrific fit. This is because the larger, mainstream broadcast companies that survived the carnage of the last eight years have things pretty much under control, more or less. Yet, there are very many smaller transactions happening all the time, which tend to drive up unit sales, if not transaction dollar volume. I’m talking about deals for $500,000 or less, many in ethnic or religious formats that are financed with available cash or by sellers.
While I expect transactions to pick up going forward, I don’t see much of a change in radio trading metrics from 2016 to 2017. For radio, we’ve settled into a range of 6X broadcast cash flow, plus or minus 1X — depending on the size of the market, the quality of the stations and/or clusters, and the competitive nature of the market the stations are in.
As for TV, the spectrum auction — expectedly — has diminished transactions. Once the dust settles however, even after big mergers like the Media General-Nexstar deal, I fully expect a surge in TV deals.
You have to wonder when TV consolidation ever will end! TV multiples have been in the 8X range. We’re just out of a quadrennial year, so perhaps buyers will pull back a little on value when estimating forward cash flow. But TV, I think, will remain a strong transaction market.
RBR + TVBR: With a transition in power set for Friday (1/20), most of the media brokers we have spoken with also agree that radio will be flat, while TV sales will be robust. But, couldn’t a change in power at the White House lead brokers to revise this forecast?
GS: I personally don’t see any impact resulting from a Trump administration, except perhaps in two areas. The first is the potential reduction in the corporate tax rate. If President Trump can deliver a much-lower corporate tax rate, then the buying companies which are taxpayers will have more after-tax “free cash flow,” which historically they have tended to plough into expansion and not pay dividends. That would boost transactions.
Second, a [new] FCC could relax certain ownership restrictions, like the prohibition on newspaper-broadcast cross-ownership. This rule is so antiquated we brokers can’t believe it still exists! If it happens, don’t expect a rush of newspapers buying broadcast stations. In fact, the reverse could be true — especially in smaller markets.
RBR + TVBR: How does the deal market today compare to perhaps 20 or 30 years ago?
GS: I’ve been a broker for 31 years. When I started, we’d make the deal and then find the financing, which often was plentiful. Not today.
Sellers are now interested in “cash ready” buyers, and buyers are very particular about what they buy, where they buy, and how much they pay. Today there is much more discipline on both sides, which I really can’t argue with. Back in the old days, in paying a premium a buyer could recover when revenue growth rates were 7%-8% annually. Today, that can’t happen when revenue growth rates are 1%-2%.
Today, guys like me stay very, very close to the money.
RBR + TVBR: What can you say about the broker environment today?
GS: On the broker side, our members at The National Association of Media Brokers really are a terrific group of skilled professionals. We never share confidential or proprietary information, but we do collaborate much more than we did 20 years ago or even 10 years ago. I suppose it’s because we appreciate our experience and special talents … and these days we need each other!