In recent weeks there have been three significant sales of major market radio stations. Is the market opening up? We checked with a couple of veterans who have been observing (and participating in) the radio station transaction market for decades to get their take on the current marketplace.
Let’s review. In recent days we have seen the sale of KXL-AM & KXTG-FM Portland, OR from Paul Allen’s Rose City Radio to Larry Wilson’s new Alpha Broadcasting for $11 million; the sale of WAMO-AM & FM and WPGR-AM Pittsburgh, PA from Sheridan Broadcasting to St. Joseph Missions for $8.9 million; and the sale of KLOK-AM San Jose, CA from Univision to Principle Broadcasting Network for $7.65 million. All of those are major market stations and, while nowhere near the price tags we would have expected just a couple of years ago, they are still substantial outlays of cash. So, are we seeing a pickup in the transaction marketplace?
“I’ve been watching very carefully. And while I can’t say I’m pleased with the metrics that the sales may represent, at least it’s a benchmark of some trading activity,” said Dave Schutz, President of Hoffman Schutz Media Capital, a radio and TV appraisal and consulting firm.
The main problem, Schutz noted, continues to be the lack of lending for broadcast acquisitions.” My suspicion is that the capital markets are going to remain very skittish because, aside from the overall upheaval that all of the capital markets have had, the more unique issue confronting the broadcasting industry is the feeling that mass-advertising-supported media – radio, TV, newspapers, magazines, even some forms of direct mail – that there’s a belief that the total budgets for that type of mass promotion are dramatically shrinking and it’s difficult to get your to get a grasp of what the fundamentals of the underlying radio business are – or the television business – until we get more comfortable with where the metrics are going to be,” Schutz told RBR/TVBR.
“We got spoiled,” Schutz said, noting that with the exception of the early 1990s in the post-World War II period, industry revenues showed very consistent growth. In the past radio buyers were always able to count on growing revenues (even if a few didn’t succeed) when making an acquisition. Today, though, for the first time ever, buyers and their financial backers are having to deal with forward cash flow multiples being higher than trailing cash flow multiples. That’s a tough proposition to sell to a banker, even if purchase prices are at historic lows.
Paul Robinson, President and CEO of both Emerald City Radio Partners and BTMI Consulting, is unwilling to call the three recent transactions any sort of benchmark for deal making. He noted that in each case you had “super-motivated sellers” and two of the buyers are religious broadcasters, who don’t have to operate under the same metrics as mainstream commercial broadcasters. Larry Wilson is a mainstream radio operator, but Robinson notes that he was able to buy a combo for $11 million that the seller bought for $55 million just 11 years ago because Paul Allen, despite being a billionaire on paper, is strapped to raise cash.
“I still believe that there is a significant delta between sellers’ expectations and buyers’ expectations. Do I think it would be easy right now to get a deal done at four or five times? If you have enough equity, as I’m sure was the case with Larry, the answer would be absolutely,” Robinson said.
Even at such historically low multiples, leverage is hard to come by. “There are still very few, if any, senior lenders that I’m aware of that are in a position right now to step up and finance a deal in traditional media,” Robinson told RBR/TVBR. “The advertising media right now, particularly broadcast, is considered a very difficult, embattled sector,” he said of the view from the lending community.
“Money hates uncertainty, and frankly there is just too much uncertainty in broadcasting right now,” Robinson noted.
RBR/TVBR observation: We look forward to the day when we can report that lenders are jumping back into the media financing pool. Right now, though, we’d be happy to even hear of a new banker dipping their toe into the pool.