Monday, July 6, 2009

How I Approach a Broadcast Restructuring Project

The “growth” segment of our business at Media Services Group is restructuring/workouts. Broadcasting company workouts are a sad fact of life with today’s soft ad market, tight credit, slow economy, and over-leveraged balance sheets. Here is a capsule look at our firm’s approach to a station(s’) management engagement, whether we are appointed as a Receiver, Trustee, or hired in a Chief Restructuring Officer role.

Assess and Protect

Immediately upon arrival, we perform a thorough due diligence review, focusing first on the cash on hand, cash needed in the short-term, the quality of the receivables, and the level of financial and accounting expertise in-house. Necessary steps are taken to protect and preserve the working capital. Stem the bleeding and buy time; positive cash flow is lifeblood. If necessary, motivate customers to pay early and stretch terms with your vendors. Survival is a requisite to fight another day.

Initially there will be a lot of meetings with staff to make sure that everyone is on the same page. Throughout the entire process, the lender(s) receive ongoing progress reports.

I also take a look at FCC compliance. This is an area where troubled companies can slip as things deteriorate, and problems require immediate attention. A review of all material contracts is another good idea (and should prompt a list of contracts which should possibly be renegotiated). This is also a good time to prepare an asset list of both tangible and intangible assets. It will come in handy when the business is ultimately put up for sale.

The final step in the “discovery” process is a thorough assessment of the people at the business. The operation should be “right sized,” which might even include adding to headcount. The turnaround manager must have a good gauge of the quality of his/her personnel.


Once all of the assets have been indentified and accounted for in the discovery process, and sufficient cash is on hand to sustain operations, it is time to focus on the turnaround itself. Key elements include:

  • Leadership
  • Top line (sales) increases
  • Operating efficiencies
  • Customer focus

The turnaround strategy should include setting challenging but achievable objectives with input from all team members. These objectives should be clearly articulated to the staff and stakeholders. People should be put into the right positions, often involving a realignment of responsibilities. It is critical at this time to establish a success–based culture. The “war” can’t be won outside the building until you have true believers inside.

In most cases, Interactive revenue represents the most immediate growth opportunity for distressed broadcast properties. New and inexpensive products should be developed, launched and sold. It is possible to do 5% of total revenue from Interactive in the first year.

All expenses should be closely scrutinized. PD’s should carry air shifts and GM’s and sales managers should carry lists (at least until the turnaround is accomplished).

Social marketing is an effective, yet inexpensive, way to market stations’ products. Make extensive use of Facebook, Twitter and blogs. Repurpose your content across as many platforms as possible.

The sales department must be trained and coached to “evangelize” the company’s products as customer solutions. This is often an area where digital offerings can come into play (i.e. sponsored email blasts, display ads, directories, streaming player sponsorships). Management should maintain contact with key customers (in addition to the AEs’ efforts), to ensure that the company is creating and delivering value.

This “execution” phase is where the turnaround specialist earns his/her fee. Focus is required to allow revisions to the plan to be made in real time as required. People deliver the success (or failure); lead, develop and mentor. Cost– cutting can be done by anyone; repositioning the company is where the rubber meets the road. If the top line cannot be fixed, all of cost-cutting in the world will not save the business.

Positioning For The Sale

After the bleeding has stopped, cash is under control, the staff has been “right sized,” and the turnaround is well underway, it is time to position the business for a sale (though this too is always subject to marketplace conditions; now is not a good time to sell a radio station).

A technical assessment should be conducted on the station facilities to see if there are any spectrum development opportunities. You may have a station which can move into a larger market; you need to know that before you sign the agreement to sell the business.

There also may be an opportunity to carve out tower assets and sell them separately (and at a higher net price) to one of the tower consolidators. Any non-core assets (such as excess real estate) could also potentially be sold separately.

This process should also provide complete visibility for the stakeholders. A virtual due diligence room should be prepared and a competent broker retained (we happen to like the fact that Media Services Group fills both the operator and the broker role with distinction). I recommend that management and staff be “in the loop” throughout the sale process. If they are left out, they will figure it out anyway!

Sale Process

A good broker will have an excellent estimate of the value of the business. A marketing plan should be developed and discussed. The lender should be on board with both the valuation and the marketing.

Here is where the commercial begins. At Media Services Group, our partners have a long history of successfully handling broadcast asset management assignments. Combined with our average 20+ years of brokerage experience, we are uniquely qualified to provide lenders and investors turn-key solutions. Half of us own stations. We are tuned in to what it takes to operate profitably in a tough environment.

Our valuation practice, headed by Bob Maccini, is one of the best in the business. We also have expertise with expert testimony; over half our partners hold advanced degrees.

In addition to the Media Services Group staff, we maintain a “bench” of qualified operators standing ready to assume market manager assignments. We are scalable for large assignments.


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