On last week’s Billboard Insider podcast Insider commented that out of home values vary from 8 to 14 times cashflow.  Reader Greg Hicks asked us to explain what factors cause the multiple to vary.  We asked out of home broker Max Drachman of Kalil and Co to comment:

That’s a good question.

Some of the primary drivers of valuations for Outdoor assets are:

• Market size – In general, assets in larger markets tend to have more value than those in smaller markets.
• Market share – A single sign in any market is worth less than a portfolio that has 20+% of the market revenue.
• Ground portfolio – If a portfolio has a significant amount of easements and/or long-term and cost-efficient leases, it will be more attractive than a portfolio with short term and greater than average lease costs.
• Upside – Low occupancy (especially on good locations).
• Deal size – A $1m deal typically attracts less interest than an $80m deal.
• Market dynamics – This is a little more difficult to describe succinctly, but an example would be a smaller market in Texas with 10% growth being more attractive than a larger market elsewhere that has no growth.

While these are the normal factors, there are exceptions.  These points are also not organized by order of importance.  For example, if an operator had 65% of the revenue in market 100, it would almost certainly sell for a greater multiple of cash flow than an operator with 3% of the market revenue in a top 50 market.  That said, if the top 50 market opportunity had all easements and 60% occupancy, the valuation pendulum would likely swing back in its direction.

Finally, the most important value factor is how the asset is sold.  Kalil & Co. specializes in Outdoor M&A.  We close deals on a monthly basis, we have set records on cash flow multiples, and do everything on a confidential basis.  We have nine brokers and our involvement will highlight all the positives of an asset, provide the deepest buyer pool in the industry, and use a time tested execution strategy that will deliver results.  I can assure you very few M&A shops have sold an asset for 14x BCF, whereas we have exceeded that figure multiple times.  We will sell an asset at the highest multiple the marketplace will bear.  Unproven options will not yield the same result.

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