Wednesday, August 13, 2008

Haircuts Are Coming

The item in "R&R Today" contains a lot of info between the lines:
The radio landscape is littered with hundreds of properties for sale, but it is a “challenging time to be divesting assets,” acknowledges Patrick Communications managing partner Greg Guy, who points out that the cash-flow multiples that once priced a large-market radio station at up to 19 times cash flow may now have dropped to 12 times cash flow. “There has been a squeeze on multiples. Major markets and small markets have squeezed the gap.” He adds that medium markets, which used to trade in the low double digits, may be holding their own best and are now being priced in the area of 10 times cash flow, while the smallest markets are in the seven- to nine-times-cash-flow range.

Veteran broker John Pierce told R&R that he expects buyers will be most interested in acquiring clusters — at least duopolies — whenever possible.
“This is a good time for buying, and it could be a good time to sell, depending on what you are selling,” he expects bulk-station packages to move the fastest because buyers are attracted to “whole markets with cash flow and Arbitron. And there is more of a chance that the buyer will pay 10 times cash flow for the properties.”

Both brokers say would-be buyers are stymied right now by tightening credit as banks and traditional broadcast lenders make it tougher to gain funding. But Pierce expects business to pick up after Labor Day. Closings, as usual, will probably occur just before midnight on December 31.

Prediction: 2009 is going to be a most interesting year with many former owners who cashed out in the 1990's being tempted to return to ownership, hopefully, at good prices - perhaps even less than what they sold for a decade ago - and a lot less leverage, which is going to make it tougher than ever for today's debt-ridden consolidated public companies.

Next year could be a great one for live, local radio and the people who know how to attract, entertain, maintain and merchandise an engaged and local audience.

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