Investment Bankers Say OOH Valuations Steady Despite Covid

Last week PJ Solomon investment banker Mark Boidman suggested that bid ask spreads are widening in the out of home market.  Insider asked some out of home investment bankers to comment and they suggested that while some buyers are discounting bids for covid, other buyers aren’t.

Max Drachman says there’s a widening range of bids but valuations are holding up

Whether or not the bid ask spread is widening is a difficult question to answer succinctly.  Obviously it’s different for every deal, and it is very interesting to see it in multiple sectors.  For example, the tower space is so hot right now we typically have inverse bid asks, meaning we usually get a handful of offers over and above the seller’s already lofty expectations (we have closed two tower deals recently at valuations over 30x cash flow).

We are closing Outdoor deals at the same rate as previous years, so based on that I wouldn’t say that the spread is widening.  Our average deal size is down from last year but I can’t point to current market factors as the reason.  Most of our clients are family businesses and their reasons for selling are seldom based on market conditions.
One area where we are seeing some widening is strictly within the bids.  We are getting a wider array of values from buyers for the same asset than usual.  That is likely attributable to more buyers making discounted offers than usual, but they are not usually the buyers in good times either.  The valuations of the assets we are selling are ending up at the same multiples as years prior.

Marty Williamson says covid hasn’t played a significant role in valuations.

Amber Williamson Galunas (left) and Marty Williamson (right), Williamson and Associates

Williamson & Associates has completed 17 transactions this year. While Covid is a topic of discussion, it has not played a significant role in valuation nor has it really deterred sellers or buyers.  What we have seen is buyers looking at the pre Covid numbers and how revenue has trended since to make sure the assets and market have rebounded. Our transactions are primarily Independent acquiring Independent, and most all of our clients are back to normal and in some cases, now out performing last year.  From our point of view, the multiples and valuations remain the same and with the interest we are seeing from existing operators, along with a substantial influx of new buyers and cash, we don’t see anymore than the typical scenario of sellers looking for the highest possible valuation and buyers trying to make sure they are not over paying.  We don’t see that gap widening …  it comes down to each side having the desire to find that happy medium that gets to the win-win. In our opinion, it’s a very good time to sell because there are probably more buyers than ever with the funds and strong motivation to acquire.

SignValue’s Paul Wright isn’t seeing a widening bid-ask spread.

Carson Frost (left) and Paul Wright (right), SignValue

We have been involved in some of “the activity on the local side” that Mark (Boidman – PJ Solomon) mentioned seeing this summer.  However, we did not see a widening in bid-ask on those deals.  We have a few unique opportunities where sellers are not interested in selling unless prices are based on future revenue potential, but the vast majority of our clients are realistic about prices and feel like it is a good time to sell.

Our lead broker Carson Frost said, “I think the comments about a valuation gap between buyers and sellers made by Mr. Boidman and Mr. Johnson hold some truth, but it really depends on the deal size.  Lamar and PJ Solomon may be referring to acquisition opportunities greater than $20 million.  Those plants may have been more severely affected by the pandemic because of their heavier national advertiser mix.  Many of the independent operators whose plants fall under that $20 million value have seen a faster recovery and, in some cases, continued year over year growth with no material revenue declines attributable to Covid.”

From our perspective, smart buyers are still out making serious offers. SignValue currently has three buy-side clients who are actively acquiring assets in their footprint and are not making half-price offers. Our sell-side clients have strategic goals to consolidate footprints, to generate capital or they have reached retirement age.  We have had several offers (between 6 and 12) on the last three deals we closed, which indicates that there is still a lot of interest at competitive prices.  OOH technological changes and market share trends have led to more transactions at fair prices during this recession than in the last recession.  The vast majority of independent billboard operators who are considering a sale should not be scared off by a Covid-induced valuation gap.

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