Where are multiples these days? Still high - - Part 5
Every station owner who's even thinking about selling wants to know where multiples are these days. But brokers tell us that's not usually the key consideration for buyers in today's market.
"I don't believe in multiples a whole lot anyway, at least as a pre-determiner of price," broker Brett Miller of MCH Enterprises told us. "I've been doing acquisitions and brokerage in the radio business for 15 years, and a couple of years before that in the cable television business. Multiples have always been after the fact analysis. That's the way we look at it. We know what the rules of thumb are. It's been two and a half times revenues and ten times cash flow - - that's been the after-the-fact analysis. It's a yard stick," he said.
But regardless of how you figure the price, Miller agrees that prices are high. "In today's environment, because the inventory is so tough, the demand is high - - and I would say it's artificially high because of consolidation - - nevertheless that's a fact, if you want to get in, be in the club and play, rather than be sitting on the sidelines, the price of admission has gone higher than what people would like to pay."
Miller says he's working with people who are looking at one potential acquisition where the multiple works out somewhere in the 20s. "That sends the investors into a tizzy. They say, 'Well, this doesn't make sense.' When you tear it apart and you look at the individual components of the transaction it does make sense because you've got some stations that are doing very well, therefore the multiples are lower, and you've got some that are not doing very well, so the multiples are a bit of a stretch, and you've got some that are not doing very well at all, I mean they're doing poorly, and the multiples are just off the charts. The multiples don't make any sense, but when you take a look at what the potential and what the up side is, yeah, you can pay a high multiple for something that's doing well and you're not missing out on the up side," he said. "I like to stress distressed properties and turnarounds for my clients, simply because that's where the good return on investment is going to come from."
This article appears in its entirety in the November issue of RBR Solutions magazine. To subscribe to the all new January debut issue of Radio and Television Business Report - The Real Business Magazine, see below to receive it - - or call April McLynn here to get your free copy: 703-492-8191.
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