Today’s podcast guest is Jim Johnsen, a managing director at the out of home investment banking firm Johnsen Fretty talks about out of home valuations and the out of home debt and equity markets.
Podcast: Play in new window | Download (Duration: 31:53 — 43.9MB)
Here are the highlights.
A healthy out of home transactions market.
The market is healthy with lots of buyers and sellers at the moment. On a scale of 1 to 10 it’s somewhere between an 8.5 and a 9.
Where are billboard cashflow multiples
Somewhere between 10-13 times is where we are seeing things go off…
An active pool of buyers
The pool of buyers is better than I’ve ever seen it. For example JCDecaux stepped up for its first acquisition in the US...They were in a joint venture with Interstate and Interstate put their half on the market and they ran it through a process and I heard it was a very close competition…Clear Channel has been active as of late. They’ve been on a long hiatus…it’s good to see them back in the market. OUTFRONT has been selectively buying and of course Lamar has always been the perennial acquirer…And beyond that you’ve got guys like New Tradition with their purchase of Regency and some follow-on transactions that they did with us recently. We closed a deal with Vector recently. Branded Cities is buying. Trailhead, MH, Keystone, McWhorter, Big Outdoor, Link, Adams, Lindmark, Las Vegas Billboards, Orange Barrel, Azalea, Tier One, Creative and a whole host of others.
Private equity is interested in out of home but has trouble scaling
I can’t count a week that we don’t get 3-4 calls from private equity firms saying “hey, we’ve done a white paper on the out of home business…or we bought some Lamar stock and that worked out well so how do we get in in a deeper way.” So the interest is really, really, strong. The dilemma for the private equity business is how do they get scale. Getting scale in the out of home business is hard…there’s only so many Adams out there…The size of companies drops off pretty quickly. Most of the private equity firms want to write a $50 million check, a $100 million check and upwards…They need a pretty sizable company…We have seen several groups come down market. Instead of requiring $10 million of EBIDTA they are doing $1-2 million of EBIDTA.
Lamar
I believe Ross Reilly is being groomed to be the next CEO of Lamar. My interactions with him have all been super favorable. He’s a business friendly guy. He likes to think outside the box. Smart, affable, well liked…
OUTFRONT
I love them. From a forward thinking sales and marketing organization I think they get it…they are not selling space…they are selling a product with lots of sex appeal…The MTA product looks phenomenal. I’m in New York city riding subways often…one thing they do right is station domination. Generally they’re trying to sell the entire environment to one advertiser at a time and making a gigantic splash…
Clear Channel Outdoor
They are the Tiffany collection of assets…the asset is good. They’ve had so many challenges for so long…their capital constraints have been deleterious…when they spun off certain markets in 2018 when you talk to Jim at Ashby Street or some of the Lamar guys who bought the assets they were in shock with how good the assets were and how much lift there was on the assets by applying some more capital and hard work.
What about Clear Channel Europe?
I’d sell it at whatever the clearing price was, but I’m sure the lenders have something to say about that…my sense is that out of home advertising in other parts of the world is different…it’s more agency than asset…it’s lower margin…if you’re trying to run an out of home company in Europe like you’re trying to run an out of home company in the US it’s a bit of a mistake…
Link Media
They’re being selective as to what they go after…Scott Lafoy has done a dynamite job…I think they’ve thought that during this feverish period of acquisitions where Lamar and OUTFRONT and others are swinging pretty hard at things they may not have the ability to compete at the same level…it’s a slow and steady wins the race philosophy
Adams
I love Adams. I love Kevin Gleason. I had the good fortune to meet Steve Adams back in the day…They would go off at a super premium price if they were ever to go to market. I don’t think they will go to market any time soon. Great company.
What out of home firms are people not paying attention to that they should…
Number one on the list is Orange Barrel. Orange Barrel is a phenomenal company that was hand built from scratch and people would be shocked if they knew how big it is now. Super quality assets. Their reputation in the marketplace is stellar.
New Tradition. A New York city culture as opposed to a Columbus Ohio culture but still a great company. They way they were able to sneak in there at the last minute and construct a dynamite deal on a lot of the Regency assets was phenomenal.
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