9-24-13.DOWNLOAD THE LARRY WILSON COVER STORY AS A PDF HERE
Larry Wilson, who built and sold Citadel Communications to Wall Street investment firm Forstmann Little & Co. in 2001 for $2.1 billion, is one of those rare individuals who?s on a first-name basis with the industry. As DEFcom.Advisors? Doug Ferber, who in 2009 helped broker Larry?s first post-Citadel acquisition, reflects, ?How many people in our business do we know instantly when we hear their first name? Not many. We had Mel for a while, but he?s out of the business. There was Carl, but unfortunately he passed away prematurely. We still have Larry.?
It?s a status stemming from an incredible winning track record, both for Larry and for his investors. It began in 1984, when the CPA and attorney-turned-radio guy and two partners established Citadel Associates Limited Partnership, with two Tucson radio stations. That partnership was followed in 1990 by another, Citadel Associates Montana Limited Partnership, adding Montana stations to Wilson?s growing empire. By 1992, Citadel Communications was incorporated, and within a decade, it had stations in 26 states. Citadel eventually grew to 205 stations in 42 markets, with Larry Wilson holding the reins as president, chief executive officer, and chairman, until the sale to Forstmann.
In the years that followed Wilson?s exit from the industry, a lot happened, to Larry and to the business he had come to love. The economy tanked, operators grappled with new realities and new media, and Larry lost his wife after a long battle with cancer. No longer content to fish, ranch, and ride horses, he decided to get back in the saddle in radio. Along with Portland-based Endeavour Capital, he formed Alpha Broadcasting in 2009, negotiating a sweet six-station deal in Portland with Paul Allen. Since that time a new company, Live and Local, has been established to bring in outside investors. Under the L&L umbrella, Wilson has rolled up about 30 stations across the country, from the Dakotas to West Virginia, Illinois, South Carolina, and Mississippi.
While many 68-year-olds are ready to wind down, Larry Wilson is on a roll, energized by the opportunities he
believes continue to exist in radio. A ?local content? evangelist, Larry has this to say about radio: ?I love it, and I love the results it gets for people.? And his goal is to turn L&L into a cash machine, generating $50 million in cash flow every year. To do that, he?ll need more stations. Which is exactly what he spends the majority of his time looking at, reading about, and analyzing. In case you missed it, here's our cover story interview with Larry Wilson
RI: Take us back to 2001. Why did you decide to sell Citadel?
WILSON: Well, it was a great offer. I would like to say I was a genius and saw everything coming, but I didn?t. I saw that business had slowed down. But it really slowed down, mostly after we made the deal in January of 2001. I just felt it was a good offer. I did think that multiples were awfully high. I didn?t see any way they were going up. The only thing I saw that could happen was they could go down. But I never dreamed that they could go down as much as they did.
RI: For somebody who loves radio the way you do, you see those high multiples, how do you separate the two and say, ?I have to do this business deal?? That had to be difficult.
WILSON: It is. Probably just as important, or maybe more important, I loved the people. I hated to leave the people. My wife was ill, so that was another factor. She was very, very ill, and she got worse. Right after the deal was done, she had a fifth brain surgery, and that was really awful. That?s when I really had to leave. I just told Ted Forstmann that I couldn?t do it anymore. I had to stay home and take care of her. It did hurt a little bit. But when you are a public company ? even if you are a private company, you still usually have shareholders. I am not rich enough to just make my own deal. So you have to think of the shareholders. Ted Forstmann?s offer presented us with a tremendous opportunity.
?Larry Wilson is part of a vanishing breed of radio operators who ?get it.? All of us should welcome him back as he hires and grows radio professionals who are so important for the future of radio.?
Saga CEO Ed Christian
RI: After selling, you watched what happened to the company you built. What did you think?
WILSON: It was appalling. I probably shouldn?t say this, but I saw the money [former Citadel Chairman/CEO] Farid [Suleman] was taking out of there, and it was ridiculous. The shareholders got a horrible deal. It really disturbed me. I talked to a few employees. I knew them all, as far as the Citadel group goes. I felt very sorry for them, because they were miserable. Farid and [former Citadel COO] Judy [Ellis] treated many of them very badly. Both of them went off into the sunset with a lot of money, especially Farid. That?s not right. It shouldn?t have happened.
RI: Did you ever run into Farid or Judy and say anything to them?
WILSON: No. I told Ted I had to go. He said, ?Well, give me a little time.? I said, ?Fine, you?ve got as much as you want.? I retreated to my ranch in Montana to take care of my wife. He called me and asked me to meet him in Vegas. I did. We met at the Bellagio. I met him at the VIP check-in area. He said, ?I want to sit down and tell you what I?m doing.? I said, ?I know what you?re doing.? He said, ?How do you know that?? I said, ?I saw Farid at the regular-people check-in counter.? He just laughed and asked, ?What do you think?? I said, ?Well, it?s your company. I think it?s a bad decision, but it?s your company.?
RI: Did Forstmann ever tell you that you were right?
WILSON: No, he didn?t. That would not be in Ted?s DNA. God rest his soul, I did really like Ted. He had some enemies that I have read about, but to me, he was the consummate businessman.
RI: Is there any way to be prepared for a recession like the one we went through?
WILSON: Well, the only way to be prepared for that was to not have a bunch of debt. And all of us had debt.
That was what was feeding everybody, the debt. Myself included at Citadel. My last deal I did was $290 million for Dick Broadcasting. It was a great deal, as long as multiples stayed up. But you had to borrow the money to do deals of that size. That?s what everybody did. The Clear Channel deal is history. That?s what happened there. They borrowed so much money to do that deal. Of course, Cumulus has just borrowed and borrowed and borrowed. The only way you could?ve been prepared to weather it, and a good reason why [Saga CEO Ed] Christian is still around, is he has been very judicious on his debt. He didn?t do a lot of acquisitions. And he?s still out there operating.
RI: You talk about the deals. How do you spot a good one?
WILSON: Oh, boy. It?s 40 years of experience, I guess. These days, I look at tons of deals. A big portion of my time I spend looking at deals. I would say 70 percent I can eliminate in a half hour. It?s not the right cluster, they are bad signals, there are a lot of reasons it just doesn?t click for me. In the old days, we had the luxury of being the consolidators, and you could hand-pick your stations, as I did in Albuquerque, Modesto, Providence, Knoxville. If you didn?t run into Lowry Mays, you were golden.
Mays was an expert at this. He was the best there ever was. Anything Clear Channel owns, for the most part, is pretty darn good. Today, you can?t do that. Clear Channel has so many stations. Cumulus has a lot of stations. A lot of them were Citadel stations, and those were really good clusters. I am really selectively looking for properties that I think are underutilized, that I think our teams could bring expertise to and make them grow.
RI: What made Lowry Mays an expert?
WILSON: He started out the hard way. He did it himself. I learned a lot from watching Lowry Mays. He knew about Class C. He knew about clear channel AMs. He picked great facilities. And he did it himself. He built relationships. That?s the way I did it, or I?m trying to do it today. I?m trying to get to know these owners and let them know that we treat our people really well. Most owners care about their people and who they are going to when they sell out. I felt good about it, when I sold out to Ted Forstmann, because I loved the guy. I think he was a true gentleman and a man of his word, a quick study. But then when I saw what happened, I got very disappointed.
?Larry and I have been close friends for over 20 years. He is loyal and a straight shooter. His handshake is a deal. Double-cross him, and you?ll be sorry. He?s a tough guy, but has a big heart and is very fair.?
Bob Fuller (pictured here with Wilson)
RI: In a couple of years, it will be 20 years since consolidation. Good or bad for radio?
WILSON: I think the concept was good. I think overall, it?s good. It has allowed radio to compete the way it should with television and newspaper and billboards and digital and all of those things. The thing that troubles me the most is that I see it, in some ways, becoming so much less of a people business. I think that is a huge mistake. Overall, I think it?s been a pretty good thing.
RI: Should there be more consolidation, or are we at the right place?
WILSON: I think we are probably at the right place. What do you want to do, let one company own all the stations? That doesn?t make any sense. What you?ve locked in to here, for the most part, with the legislation that was enacted, is three major competitors in each market. That?s what it is in most places. If you compete really well, you could have one person doing 50 percent of the business, but not much more than that. I don?t see how you consolidate any more.
RI: At some point, you decided you were getting back in. Why was it the right time?
WILSON: Well, it wasn?t the right time. 2009 was not the right time to get back in. 2013 is probably the right time. I hope it?s the right time, because I?m doubling down right now. But I did a lot of studying. I did a lot of soul-searching, and just regular searching, of, ?Do I want to get back in this? Is it still a viable business?? And I concluded back in 2009 that I thought it was still very viable. My old partners at Endeavour Capital joined me and encouraged me to do it. We were a little early, but I don?t regret getting back in.
We acquired some wonderful stations in Portland, Oregon [for $50 million]. We have six stations. But we had to do a lot of fix-up on them ? a lot more than we had anticipated. We had to change formats. We had to switch the News/Talk from AM to FM. We did about every gyration you could do in Portland. That was really Bob Proffitt and his team that did it. Yes, I was in the strategy sessions, but they did it. They did a phenomenal job. What we have there now is a wonderful machine. It?s fantastic. It?s doing well. It is live and local at its best. We?ve got a place in that community, and revenues are starting to show it. We?re doing very, very well.
RI: After Alpha in Portland, you kind of went quiet.
WILSON: We totally put our head down and focused on fixing Portland. It was kind of the petri dish to see if this was really still a vibrant business. It?s not quite as vibrant as it was, but it is still an excellent business. The whole proof in the pudding is that it still gets phenomenal results for advertisers. As long as that keeps happening, they will keep buying advertising.
The other thing is, as long as you supply super-good content, people will come to you. There is no substitute for great content. I see a lot of local talent being terminated, and that?s not a good sign. These people in local markets are stars. Come to Portland and go out to lunch with one of our stars, you will find out what big stars they are, because people recognize them and want to talk to them. That?s a big deal. It?s going to continue to be a big deal with L&L and Alpha.
RI: So with Alpha, you had your head down. When did it come back up?
WILSON: Prices kept going down and down and down. In 2012, I finally decided I would start looking again. I knew I would have to put together a new team, because Endeavour Capital?s investment in us was through a fund that is fully invested. I aligned myself with some of my old friends in the radio business, Bob Fuller and Steve Cody, and Kit Snyder at Little Rock. A group of us put up the money and we started L&L.
WILSON: RI: You got a great deal on Triad. Take us through that one.
It was a busted deal. They put it on the market. They had great expectations of multiples. I declined it. Six months later, nothing had happened. I decided to go back and dust it off and take another look. It was obvious they were going nowhere. [Former Triad CEO] David Benjamin obviously did not want to sell. It was a very contentious deal. Fortunately, we persevered. It tried our patience, big time. But we persevered and we got the deal. It was well worth it, especially after we sold Fargo. Our net cost on that was, I don?t even want to talk about it, it was so low. It was a great deal.
They?ve got some superb stations in Peoria and Bloomfield, and even in Fargo. Jim Ingstad knew what he was doing when he bought them. They?ve got great operations down in Gulfport and Biloxi. Savannah and Hilton Head was all messed up, but we think we?ve got that figured out. We are on a course to move forward with that. We are really happy with it. I am not sure exactly how we got the deal. I think we got the deal because we could get the money and nobody else could.
?Larry possesses old-school attributes. He is an astute businessman who is fair in his dealings and whose word is his bond. He is one of those people with whom you feel comfortable to conduct business on a handshake. He is a man of character who knows how to operate radio stations!?
Beasley Broadcast Group Chairman/CEO George G. Beasley
RI: Where do you want to take all this?
WILSON: I thought you were going to tell me. We are little guys, and we are just picking our way. We?re being very selective in what we buy. I don?t have a goal of a few hundred stations, or 500 stations. All I know is I?ve got a team together that knows how to do this. I feel extremely confident in them, and I want to give them resources to let them do their thing.
RI: It?s safe to say you?re looking at deals.
WILSON: No doubt about it. I would like to get this to $50 million to $75 million in cash flow. That?s the only real goal I have. That?s what drives me, the bottom line, and really providing a great operation in a local community, serving that community yet still making a nice profit for the shareholders. We?re going to keep going as long as I can continue to attract equity, attract debt, and borrow more money. We are not going to borrow crazily. We kind of all drank the Kool-Aid, and it was pretty cool at the time. It was a great run, but looking back in hindsight, it was bound to slow down. You can?t do double-digit growth in any business forever. But I think now, the growth is decent.
RI: Do you have an eye on any particular markets?
WILSON: It doesn?t matter where. We are not focused on the little tiny markets. I think that?s a good business. It?s just not one that we want to be in. But if we find a small situation where you?ve got a dominant cluster, we will look at that. Bloomfield is a great example. Bloomfield, West Virginia. We love it there. The guy that runs it is fantastic. He?s been there a long time. It just keeps on cranking. I don?t set out to say, ?I?ve got to be in New York,? or something like that. My wife said, ?What book are you reading right now?? I said, ?The BIA database.? I?ve got three or four books on my desk that I haven?t started. I am totally immersed in this right now. My office is nothing but notebooks. It?s notebooks of potential targets, not that have come up, but things that I would like to own. There are a lot of notebooks.
RI: What is the real multiple in radio right now?
WILSON: I think no matter what they say, the top end for the biggest markets would be 6 1/2-times. You can look at the deal that was just done for Seattle and Phoenix, and those were ?beachfront property,? and I think the multiple was in that area. Then it gets lower as the markets get smaller, in my opinion. I think probably, overall, you would say it is a 6-multiple deal. Some owners are realistic, and some are not.
Some are hoping for higher multiples, and once I get all these bought, I hope they?re right. I?m not sure that if you?re looking to get it on the multiple side, it?s going up much. I don?t think it is. It might go up a little over time. But to me the key is to be a really good operator and produce margins of 30 percent-plus. If you do that and you keep your debt manageable at a 3- to 4-times cash-flow level, I don?t see you getting hurt, and I think you would make a really good return on your investment down the road.
RI: Could you see yourself buying a company somewhere near the top 15 to 20?
WILSON: I would definitely look at that, if that became an opportunity. It really comes down to our confidence in our ability and my confidence in my team. I really want to give them things to work. If there were a bigger one that comes available at the right price, you could buy just about any of them if they had a big multiple, but I am not going to do that. But if I found one that I thought was reasonably priced for what they have, I definitely would take a hard run at that. I have access to a lot of capital.
That would be very interesting. If we did get that opportunity, I could get the money. But I can only get the money if the deal is right. I couldn?t get the money to pay 8-times. No investor in their right mind is going to pay 8-times.
"Every now and then you see someone who has deep experience in an industry, a knack for timing, and an eye for a good deal buck "conventional wisdom" and make a move that goes against the trend. Larry's reentry into the business demonstrates his belief that there is a lot of life (and money to be made ) in the radio business if you buy right and know how to operate. And he's got skin in the game which sends a strong message to his people and fellow investors. I wouldn't bet against him."
..........Dick Ferguson
RI: So L&L stands for ?Live and Local,? not ?Larry and Larry.?
WILSON: Some people think it?s ?Larry and Lynn.? My new wife, her name is Lynn. But it?s not.
RI: You?re basically making a statement with that. Talk about why you picked that name.
WILSON: It?s just the heart and soul of what we believe is important now. Not to say that national programming isn?t good in some instances. It is good. Rush Limbaugh has done really well. Hannity has done well. There are lot of examples of national programming, syndicated programming, that does well. But when I?m talking about live and local, it?s not just on the air. It?s about our people getting involved in the community: being on the board of the Pioneer Square in Portland.
Pioneer Square influences a lot of great things that happen in that community. We?re very much involved with the Rose Festival and the Jazz Festival. That?s what I mean by live and local.
We believe in having live morning shows where it fits, and live all kinds of shows during the day. That really works because if you are syndicated, the difficulty with that is you don?t have somebody who can go out on remotes, or go out in the community and be MCs at concerts. I think all of that is really the heart and soul of radio. You?ve got to be out in the community and be visible and really make life better in these places. That?s what I mean by ?Live and Local.?
RI: Let?s talk about the industry. What happens, in your opinion, to Clear Channel in the five years?
WILSON: The speculation is that they will end up with just the big markets at some point, and sell off the others. I honestly don?t know. We compete against them, but that doesn?t really give me any insight. You can either keep operating the way it is and hope to pay down debt, or you can sell off some stuff and pay off some debt. Or you can sell to a bigger company. I think the latter is probably unlikely in that they are so big, it would be hard to swallow.
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RI: What about Cumulus?
WILSON: I think their focus appears to be trying to fix the big markets. They?ve got a pretty ugly situation in the old ABC markets. That?s just what I read. I don?t know much about them. I think they are just trying to fix what they?ve got.
RI: Does digital play a role at L&L?
WILSON: It?s very important. In Portland, where we?ve really had some time to let it percolate, we are doing very well on that front. In the other markets, one of the things that we tell the people we will bring to them is some ideas on digital. Frankly, none of them that we?ve bought have been very far advanced in digital. We hope, over time, to change that. I think it?s really important. I think some people write that it?s all over because of digital. I don?t buy that. I think that?s not the correct thinking. What I still see is a lot of texting with young people ? an unbelievable amount of texting. I have a lot of grandkids. They are still fighting over which radio station we are going to listen to when we drive in the car. That, to me, is a very good sign that young people are still listening. Listenership is still very, very good in radio.
RI: How are old are you? How is your health? Do you think you are going to be doing this until you take your last breath?
WILSON: I don?t know. I think that?s a long time from now. I hope it?s a long time from now. I?m 68 years old. I?m in good health. I work out as often as I can. When I?m on the road, I try to make it a practice to walk for an hour every day in the early morning. I plan to do this as long as Bob, [CFO] Donna Heffner, and [Director of Programming Scott [Mahalick] will put up with me. I guess in many ways, I am awfully demanding. I am very impatient. But I try to be good to the people I?m with. I do push pretty hard.
As long as I?m able to keep pushing and driving the ship, that?s what I want to do. I?m very fortunate to have the people I have with me. I wouldn?t want to be doing this quite like I did at Citadel. I?m not saying I?m not involved in operations now, because I am, but I have trust in Bob and Scott and all the others to hit it the right way. I can operate from 30,000 feet and be part of the big decisions, and I am perfectly content. I let them drive the rest of it. I think I am going to do it for quite a while.
RI: Are you saying that in your Citadel days you would call the studio to ream out the morning man?
WILSON: No. I never did that. I might after the show. I was probably on the phone with Bob Profitt more then than I am now. I make the same decisions he makes and he makes the same decisions I would make, when we don?t even talk to each other. I see it over and over and over again. I have developed a trait that I can stand back a little farther. I think that really helps an organization if someone is looking from 30,000 feet. I might see something that nobody else sees, because down in those trees, you don?t see everything.
RI: Is the radio industry in a good place right now?
WILSON: I think it is. I wouldn?t be here if I didn?t think it was. I just hope that this centralization doesn?t run too far. People are what makes this business work. If you don?t treat your people right, or you don?t have enough people, people will wear out. You can only have somebody voicetracking on five stations for so long, and then they are going to get tired and go sell cars or go do something else. That is probably the biggest concern I have ? if things are cut back so far to save costs that the people are getting worn down. We just used LinkedIn to find a manager in Savannah. She reached out to me, I read her profile and told her to call me. We started talking and found a spot for her. People are unhappy in this business, and we?re going to try to capitalize on that.
Reach out to Larry Wilson at larry@wilran.com
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