Thoughts and observations on the radio/TV station and wireless tower trading markets. A look at the impact and integration of new media into station operations.
Station values, stations for sale, radio and TV station news, towers, and more from the Managing Director of Media Services Group.
Media, LLC has agreed to purchase the assets of radio stations KFMW-FM,
KOKZ-FM, KWLO-AM, and KXEL-AM, Waterloo, IA from Woodward Communications Inc. (subject to FCC approval). The purchase price is $3,550,000.
Jody McCoy of Media Services Group’s Colorado
Springs office was the exclusive broker representing the seller in this
transaction. George Media Services Group
Radio revenues are reported up two months in a row in both New York and Los Angeles. The broadcasters I am talking with are, for the most part, telling the same story. The radio business is improving.
The overhang of workouts and bankruptcy deals has been absorbed into the market. The depressed pricing inherent in these types of transactions has pretty much run its course. Balance Sheets today are much healthier than those from five or six years ago.
Bottom line: Radio has turned the corner.
While multiples are still mostly between 6x and 7x, look for fewer deals in the 5s and more pushing 8x. The bias is now clearly to the upside.
If you would like to confidentially discuss station pricing and opportunities, the Media Services Group suite will once again be at the Encore beginning on Sunday. Please get in touch if you would like to get together.
JVC Media/JVC Broadcasting has expanded with JVC Media of Florida’s announcement to purchase a Gainesville/Ocala, FL cluster from Asterisk Communications. JVC has been operating the stations in an LMA since May. On January 17, JVC filed its formal application to acquire the stations for $3.5 Million.* The stations include Hot AC WMFQ-FM, Country WTRS-FM/WYGC-FM simulcast and Rhythmic CHR WXJZ (“Party 100.9”). The $3.5 million deal includes $350K down, $500,000 in a promissory note and $2,650,000 cash at closing. JVC will spin its CHR/Dance WBXY-FM (“Party 99.5) to RMA Media (Ricardo Arroyo) for $500K. On December 26, Party 99.5’s format was moved to JVC’s WXJZ-FM (100.9) last month. John Caracciolo and Victor Canales are the principals of JVC, and financing is provided by Northwood Ventures. The stations include two primarily serving the Ocala and three oriented to the northern Gainesville side. Ocala WTRS-FM Dunnellon, a Class C2 on 102.3 MHz with 50 kW @ 489’ WMFQ-FM Ocala, a Class C2 on 92.9 MHz with 50 kW @ 476’ Gainesville WXJZ-FM Gainesville, a Class A on 100.9 MHz with 6 kW @ 299’ WBXY-FM La Crosse, a Class A on 99.5 MHz with 2.2 kW @ 472’ WYGC-FM High Springs, a Class A on 104.9 MHz with 3.2 kW @ 449’ I was pleased to represent the seller, Asterisk Communications in the transaction. Congratulations to Fred Ingham, John Caracciolo, Paul Homer, Ricardo Arroyo, and Victor Canales on the deal. *Pending FCC approval George Media Services Group
The Inside Towers database has been released and is now shipping.
You can now lookup, plot, map sort and filter all of the tower information from the FCC’s tower registration database in one easy-to-use program. Custom user information, including attaching local files and folders can be appended to any record. Towers may be looked up by distance from a Zip Code, lat/long coordinates or an existing tower. Column displays are customizable. And the database may be updated (online) as often as you require.
Google maps and Google Earth satellite and mapping are available with a single click. And fields may be exported for further use in another program.
The database is available for a one-time fee of $1,500; quotes for multiple licenses are available on request. Contact Inside Towers today at: Inside Towers Database
Wiley Rein has announced the launch of a new blog, WileyonMedia. It highlights the latest news and
insights from the firm's top-ranked media attorneys. Broadcast and
multichannel video regulation, media transactions, program content, digital
rights, journalism, employment, privacy, and happenings at the Federal
Communications Commission (FCC), the Federal Trade Commission (FTC), and on Capitol
Hill are among the topics covered by the firm's media law professionals. Wiley Rein Chairman Richard E. Wiley, the former FCC chairman who heads the firm's communications practice, will be a regular contributor. This looks like a great addition to your reading list. George Media Services Group
Our sister publication, Inside Towers, wrote an interesting piece on Gary Hess and his jump with Steve Dodge and Jimmy Eisenstein from broadcasting to towers, launching American Tower. It all started with one broadcast tower (and an attempt to keep a Palm Beach FM station on the air). Check it out HERE. Quite a story!
If you would like a free charter subscription to Inside Towers, click HERE.
The father of Cumulus Media CEO Lew Dickey Jr. and co-COO John Dickey began his career at Storer Broadcasting’s WWVA(AM), Wheeling, W.Va. He was promoted within Storer to leadership positions at KDKA(TV), Pittsburgh followed by WAGA(TV), Atlanta. In 1958, he founded Midwestern Broadcasting by acquiring WKWK, Wheeling, W.Va. Dickey turned around the station in 24 months. He started expanding Midwestern by adding Toledo, Ohio stations WOHO(AM) in 1965 and WWWM(FM) in 1973.
Shortly afterwards, Dickey bought WLIO(TV), Lima, Ohio in partnership with the Toledo Blade newspaper. In 1992, he purchased WALR(FM) and WCNN(AM), Atlanta.
“My dad was an enormously talented broadcaster and, more importantly, a deeply devoted husband, father and mentor. He touched the lives of many people and will be dearly missed,” said Lew Dickey Jr. in a statement.
Lew Dickey Sr. is survived by his wife of 57 years, Patricia; six children: Pat, Lew, David, John, Michael and Caroline; and eight grandchildren. As of press time, services plans had not been publicly mentioned.
cash flow multiples have always been the top discussion topic with radio and television station
buyers, sellers, bankers and brokers. Particularly
in the convention bars. But, “caveat emptor!” There are a myriad of ways to cause an “apples
& oranges” comparison. Here are a
few thoughts to help you match your apples to other apples:
all discussions on multiples with a grain of salt, whether directly with the participants
or in published reports. Unless you have seen the financial statements and the
asset purchase agreement, you do not really know the multiple.
multiple to the seller and the multiple to the buyer are usually very different
on the SAME transaction; just ask them. Case in point: on a transaction some
years ago, my client, the seller, thought that he got a 20x multiple. The buyer
thought that they bought at 12x. They were both correct. The price and the cash
flow at the time of the signing of the APA suggest that the seller was correct. The actual and pro forma
cash at the closing, following a long LMA, suggest that the buyer was correct.
BCF multiples can be based on a) trailing twelve months, b) calendar year, c) projected,
d) reconstructed with expense savings pro forma, or e) any combination.
Published multiples are often estimates from uninvolved parties, or if from an
involved party, reflective of the "spin" that he/she wants to create
in the marketplace. Brokers are often asked for the multiple in a deal; most,
like us, will not give them out. Some make up their own number which often bears
little resemblance to reality.
Often, a sale will bring a lower real multiple if several markets are involved
(many times a seller could net much more, and a higher sale multiple, if they
break up the markets and sell to strategic buyers).
Sometimes the "true" multiple is buried in the weeds of the
transaction, particularly if swaps are involved.
How do you value the stock component of a deal if the consideration is a combination
of cash and stock?
How do you "adjust" the multiple to fair market value when there are
tax considerations (such as 1031 like kind exchanges).
"Distress" situations (bankruptcy and receivership) usually bring
lower multiples than sales of healthy businesses.
Stock sales bring lower multiples than asset sales (to compensate for the tax risk
and lower basis).
Multiples are often higher in cash flow deals where additional cost savings are
Multiples are often higher when the seller is taking back paper.
What is the multiple if there is no (or minimal) cash flow?
There are a lot of factors which enter into the "multiples"
discussion. Take care to make sure that all involved parties are speaking the
same language. Ultimately the value of
the station (or cluster) is worth what a willing buyer will pay and what a
willing seller will accept. A buyer
should determine his/her price based on the value of the future returns,
discounted at a reasonable estimate of the risk. In the end, the marketplace determines the
Media Services Group P.S. Following this initial post, several additional examples of the "My Cash Flow Multiple" vs. "Your Cash Flow Multiple" argument surfaced:
The treatment/allocation of corporate expenses in adjusting EBITDA back to BCF.
Add-backs of "owner expenses" (i.e. whether or not they are truly operating expenses).
Treatment of "inter-company" revenue such as traffic services and unwired nets (which often vaporizes at closing).
Media Services Group gathered for a meeting the day before
the show started. It is always a good
opportunity for us to compare notes on the state of the industry. With our national footprint of eleven offices,
we are able to get a handle on trends, particularly in the area of station
We believe that radio station prices are fundamentally
trading in a range of 6.0x to 7.0x Broadcast Cash Flow, with “outlier” deals as
low as the 5s and as high as the 8s. Our
confidence level on this position is quite high; and the meetings we had in our
suite with buyers and sellers supported the thesis.
Lew Paper’s (Pillsbury) breakfast was jam packed this
year. This is a good barometer of the
state of the trading business. Marci Ryvicker (Wells Fargo) kicked off the session with her annual
state-of-the-industry report. It was
generally upbeat, though she pointed out that radio’s gains at the expense of
local newspapers had pretty much run its course. Still, radio is trending up somewhat for the
Jeff made some salient points about radio being radio’s
worst enemy. He noted our tendency to
shoot ourselves with massive spot loads and the failure to provide compelling
Larry noted that you can once again buy stations at
reasonable prices (putting his money where his mouth is once again with his
recently announced $13 million deal for Columbia, SC). He also cited our early stage position in
monetizing digital, and the need to improve the quality of commercials.
Mary noted that investment capital is returning to radio,
including some community banks. Along
with Jeff, she touched on the need to bring new people into the industry.
Lew talked about Cumulus’ recent acquisitions of Rdio and
Westwood One (formerly Dial Global). He
cited XM/Sirius as a competitive threat, but stressed that they still receive
less than 5% of listening.
Fred Jacobs posted a great list of “remarkable Radio Show
quotes” which you can check out HERE.
The Georgia Association of Broadcasters put together a great video from their GABBY Honors night, including the Annual GABBY Awards for Broadcast Excellence. Honors night took place June 7, 2013 at Georgia Public Broadcasting Headquarters in Atlanta. Click HERE for the video.
television station trading market is on fire. It is a great time to be a
buyer…or a seller.Supply and demand are
at work and all the stars are aligning to make this the perfect opportunity to
own a TV station. TV station consolidation is being driven by the need for
scale, increasing retrans revenue, the looming spectrum auction, and low
interest rates (or at least, easier borrowing). If
you listen carefully, you’ll hear whispering about the similarity of the
current TV market to the radio business boom in the mid-90s. In TV, scale
matters and it seems everyone has arrived at that conclusion at the same time.
No one is sitting still.Being big is a
big deal. From
an M&A perspective, buyers will pay for scale.And it is an impressive list of buyers:
Tribune, Gannett, Sinclair, and Gannett to name a few.Peter Liguori (chief executive of Tribune)
was quoted as saying, “Our investment thesis is simple:Scale matters.” Scale
is more relevant than either the network affiliation or geography. The
“scale argument” is very valid with the bigger revenue and expense numbers in
the larger markets. When operators have sufficient scale, they have leverage
with their vendors across the spectrum. Plus the scale brings with it
more resources to develop top line revenue, more expense savings through
consolidation, and generally, a lower cost of capital. Most of
the action happening in the TV business right now is in the top 50 DMAs, with
the spectrum auction players focused on the top 35 (and primarily on second
tier properties). The Spectrum Auction
has created an artificial floor to TV station values. On September 28, 2012,
the FCC adopted the Broadcast Television
Spectrum Incentive Auction NPRM. In order for wireless networks to keep
pace with the demand for spectrum, the FCC proposed to free up the some of the
TV spectrum via an auction. They will be clearing and reallocating parts of the television spectrum. Owners of TV stations will have the option to voluntarily auction off their spectrum to the wireless industry. A number of well-heeled spectators are betting on buying “today” and playing the auction “tomorrow.”The rising tide from the auction is lifting all of the boats.It, in effect, gives owners a “put” (and therefore downside protection) on prices.
TV may be
following the radio consolidation path of the ‘90s, but likely with a better
outcome. TV is more easily scalable than radio. It is a more
transactional type of business model. Radio has to be very concerned 24/7
with local programming (versus the network TV model). There are far fewer
TV stations than radio, so governance is easier. TV may wind up looking
more like the cable business, in terms of ownership/scale, than radio. Multiples
have moved higher for TV.Banks are
growing more comfortable with leverage on broadcasters’ balance sheets.I believe that the currently trading multiple
is in the range of 8x to 10x. The icing
on the cake may come from badly needed regulatory relief:
More favorable cross-ownership rules
Possible relaxation on foreign investment requirements
On the negative side, there is some discussion within the Beltway about eliminating the UHF discount and about tightening the rules on JSAs and SSAs.
been nearly $7 billion in TV station M&A so far this year and there’s
approximately another $2 billion more projected to come before the end of the year.* This market is hotter than it ever has been. Now is a great time to buy. Or
The Radio Show is just around the corner, September 18 - 20, to be exact. Media Services Group will have a suite at the Rosen Shingle Creek Hotel and will co-sponsor the Leadership Breakfast on Thursday morning (presented by Lew Paper of Pillsbury). It should be a great convention.
If you would like to schedule a confidential meeting during the show, please get in touch.
A: Often, preparing the due diligence information prior to the marketing of the station(s) is one of the most time-consuming steps of a sale.
Most station marketing agreements with media brokers call for a duration of six to eighteen months, with twelve months being typical.
Time on the market varies. Like real estate, stations that are priced more closely to their Fair Market Value tend to sell the quickest.
The FCC approval process generally takes 60-90 days, with the Staff approval becoming “final” in an additional 40 days. Any objections can delay the process.
A: MSG uses a password-protected, online, due diligence room. You will be provided with a username and password after signing the appropriate NDA. ALL OF OUR TRANSACTIONS ARE CONFIDENTIAL unless notified to the contrary. No one at the client or station level is to be contacted without permission. Each site typically contains a Descriptive Memorandum as well as more detailed information on real estate, financial information, employees, etc.