Doug Ferber, CEO/CCO, DEFcom Advisors, LLC, gave RBR-TVBR some takeaways from the NAB Show this week, from the lens of M&A activity and the future of radio:
“Favorite comment I heard at the NAB in Las Vegas: “It’s so much easier to get a deal closed when you’re making the seller a rich man…”
The two most common questions from the show:
1. Will there be an IPO or two (or three or four)?
Short answer…yes. Longer answer…The IPO market in general is hot. If you read the Radio tea leaves on the flight home you saw technological innovation taking root in the NextRadio App…soon on the dashboard of many new automobiles in addition to the several million smartphones already in the hands of consumers. It’s the new age version of the transistor radio operating on the same device as internet competitors…and the FCC seems to be listening intently regarding the activation of the FM chips in non-enabled phones. You also heard more about the monetization of digital initiatives and the planned expansion thereof. I felt energized about the future of the industry. IPO’s are supported by future expectations. The real question might be who will be first?
2. Are cash flow multiples rising?
The multiple Emmis paid in NY was around 7x net of expense savings. This is not an indication of multiple expansion. If the basis is a rumored/unannounced transaction, you’re relying on one data point. One event does not a trend make. When you see a few confirmed deals above 7.5x (net) then you may be able to assume that cash flow multiples are increasing. Until then, buyers of cash flow want to pay less than 7x and as close to 6x as possible.