First, it is probably appropriate to explain the NAB Show from a broker's perspective, or at least from a Media Services Group broker's perspective. In actuality, we see very little of the convention. Our time is spent in our suite in non-stop meetings with station buyers, sellers, lenders, and investors. And since MSG is a national firm, we meet with clients and customers from all over the country. The week gives us an excellent perspective on the state of the industry, station trading, and station values.
This year's show was without question the most upbeat since the economy hit the fan during the Austin Radio Show, in fall 2008. Sentiment about the economy was better, and financial performance at the stations has improved, with many operators expecting their second "up" year in a row.
Our suite was busy, with at times twenty or more people huddled together in simultaneous meetings. Deal flow has increased and the quality of inventory appears to be getting better. Most of the deals we completed last year were in small markets or involved workouts and bankruptcies; this year we are getting deals done in good, cash flowing clusters.
So why are things better? I've identified three factors:
1) As mentioned above, business at home is better. Most stations are running ahead of year-ago numbers and pacings are good.
2) Lenders are coming back. Not in droves, but they are at least beginning to write some new broadcast loans.
3) The Bid/Ask spread has narrowed. Sellers have come to grips with the price reset, and buyers are realizing that we are off the low with the trajectory decidedly up.
Our opinion on radio multiples is that stations are trading between 7.0x and 8.0x Broadcast Cash Flow, with "beach front" property in the mid-8s. We now have enough data points to view this range with a high degree of certainty. No doubt there could be some outlier deals on either side, but most transactions are in this ballpark.
There is every reason to expect a robust Radio Show in Dallas in the fall. I hope you join us there.
George
Media Services Group
Just gotta say it. To spend 7 to 8 years just to pay for your radio station investment seems too long. Lots of variables, I agree, but for a business in as much turmoil as this one, 3 to 5 times cash flow is more like it. George. I know you want to extract the max for your sellers...and God Bless you for doing that, but for those of us running radio stations it's a very tough selling environment in most instances. Expenses continue to rise and few markets are really growing.
ReplyDeleteI agree with Mr. Weaver, we are currently doing a deal here in Colorado at 4.2 x EBIDTA. And, a debt facility at 75% of that multiple. But, I do agree with your take on the reality check that business is up.
DeleteI appreciate the posts George!