Moorgate Partners recently advised Premier Outdoor Media on the sale of 200 billboard faces, including nearly 50 digital, to Lamar Advertising. Premier had been backed by private equity investor Caruth Capital Partners. Billboard Insider talked with Moorgate Partners’ Director Jeff Seddon to learn more about the private equity market.
What’s the current private equity view of out of home?
We’ve seen an uptick in private equity interest in OOH over the last several years after the industry demonstrated its resiliency during COVID. OOH remains the only “traditional” advertising medium that continues to grow steadily and stands out in terms of continued interest from PE sponsors.
While some PE firms have completely shifted away from investing in advertising business models, what makes OOH compelling to them is the industry’s unique combination of revenue stability and a true regulatory moat. This results in attractive businesses with growing free cash flow profiles across OOH, which are increasingly hard to find in other sectors of media.
What are private equity investors currently looking for in out of home?
Aside from the obvious investor buzzwords – established operations with strong market position, high growth potential from digital conversions and/or M&A roll-up, proven management teams, and an opportunity to drive revenue growth through optimized sales and the introduction of programmatic – the number one thing PE investors are looking for in OOH, and struggle to find, is scale. Even lower middle market PE firms often require more than $4 million of trailing EBITDA, not BCF, to consider an investment, and those who invest below that threshold have found it difficult to be competitive on value given industry strategics can acquire tuck-ins on a BCF multiple due to their operating efficiencies.
So while investor appetite is there, the real challenge for PE is finding platforms of meaningful size.
What are the pros and cons of taking private equity?
I’ll start with the pros, first and foremost of which are access to capital. If an operator is looking to accelerate growth beyond what the business can support organically, private equity capital can be a great option to fund acquisitions or developments while maintaining conservative levels of debt. Alternatively, this capital can provide an opportunity for those looking to take some chips off the table to derisk or cash out select company shareholders without committing to a full sale.
A PE relationship can also bring a slew of other benefits for operators including: preferential debt relationships, operational / financial support, and experienced strategic guidance.
On the flip side, taking on private equity capital can come with some strings as well. PE investors will require some level of control for that capital, which may lead to friction with the long term owners or employees if there are differing visions for the business. The vast majority of PE investors will also be looking for a near-term liquidity event – often between 4 – 7 years – in order to return capital to their investors, which will influence business decisions and timing around an eventual company sale. Other cons could include enhanced oversight and reporting, cost controls, and management fees charged by the PE investor.
You’ve said that it’s important to control costs to succeed in out of home. Can you elaborate?
Absolutely. While revenue growth is obviously critical, it’s often the cost side that determines long-term viability, especially in tougher macro environments when national advertising spend slows down. What separates strong operators from the rest is discipline around leases and municipal contracts.
We’ve seen time and again that companies who stretch too far with high MAGS, aggressive revenue shares, or one-sided municipal contracts can quickly find themselves upside down when the broader economy softens. Fortunately, in our experience these situations are the exception, not the norm, and the industry overall remains incredibly stable.
You can contact Jeff at 609-276-5250, Jeff.Seddon@moorgatepartners.com
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