In day three of our series called "Where Are The Radio Deals?" we hear from Larry Patrick. Patrick is the managing partner at Patrick Communications. In addition to being a successful broker, Patrick is also a small market radio operator, so he certainly brings a unique perspective to the question, "Where Are The Radio Deals?"
Would you call the past 12 months a good, average, or bad year for radio deals?
I would say that it was average and reflective of the new reality. Lower multiples and a difficult borrowing climate continue. Some of the last workouts occurred and a few new groups grew. But activity is down from a high of five years ago.
What surprised you over the past 12 months?
The drop in values for stations. To see quality stations sell for six times is disappointing. Radio seems to have lost its core growth and is existing on digital to move it forward. A new reality on pricing has set in for the industry.
What is the reality of multiples for radio these days?
Six to seven times for most groups. Slightly higher in larger markets and slightly lower in smaller ones. All driven by the level of financing available to buyers.
What do you think we'll see over the next year?
I think that some private equity groups will realize the returns that well-managed groups can produce (in the 30-35 percent range) and realize that this is a good place to park money. I would hope to see private equity rediscover radio.
Do you think we will see Clear Channel move any of its smaller-market stations?
I think that is unlikely as Clear Channel seems to want to be paid the multiple that it paid to acquire the stations. That simply cannot happen in this environment of compressed multiples. They paid 10 times. No such buyers today.
Where will CBS be in one year?
CBS Radio is trying to grow but it is difficult. I think that the CBS team is doing an impressive job with the assets. It is hard to replace the big margin that CBS stations produce and the strong BCF for the radio group. Only if a real opportunity that has no negative tax consequence for the parent company emerges will you see CBS move. I think that is unlikely.
Do you think we'll see a blockbuster deal over the next 12 months?
I do not see any blockbuster deals on the horizon. If there is one, I would bet that Cumulus will be involved. But, most people are paying down debt, building up their margins, and trying to navigate the more troubled waters of the current industry.
Reach out to Larry Patrick at larry@patcomm.com
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