Yesterday Insider talked with Max Drachman of Kalil and Co about coronavirus and the out of home market.
The last few days have been tough in the stock market and for the public out of home companies. What’s your take on the coronavirus impact on out of home?
I certainly don’t want to make light of the significant impact the virus (and Saudi/Russia oil price war) has had on the stock market because some of the values I have seen in the last few days have been eye opening. That said, our firm is speaking with Outdoor operators across the country on a daily basis and the uniform feedback we have been receiving is they are still signing ad contracts on a routine basis. Further, there is a good chance that increased political spending on OOH will make whole or surpass any dip caused by the slowdown.
As you know, we are also in Broadcast, and things don’t seem to be slowing down there either. We have close to $100,000,000 worth of Radio & TV transactions in front of the FCC right now, and in the last few days three different buyers (private and public) have proposed acquiring TEGNA for $8.5 billion.
How is today different from the 2008-2011 slowdown.
Many of our clients have been through a few recessions and they just do not see the virus causing long term issues like the subprime crisis provided ten years ago. The 2008-2011 slowdown was different for M&A because it was a banking crisis at its core, which led to fewer companies having access to financing. Deal flow slowed based on fewer buyers, however valuations were not materially dissimilar from where they are today. Most sellers did not have to sell, so they simply waited for things to clear up if they were unable to find a buyer who saw the market conditions as temporary and proceeded with a long term focus.
Any guesses on the ultimate impact on out of home revenues?
I don’t think anyone really knows. Based on the people I speak with, perhaps the most important being my wife who is an emergency room physician who is alert but not worried, this too shall pass and likely sooner rather than later. Outdoor tends to have longer term contracts compared to other businesses which gives us a certain immunity to short term macroeconomic issues.
What advice do you have for out of home operators?
The only thing that comes to mind is I remember how much people appreciated our working as hard as we did during the recession when others in our line of work took time off. If your advertisers feel like you were there for them when times were tough, they will remember you when times are good. The space itself remains in excellent shape long term, so hopefully very soon we look back at this crisis as a time of great concern but of little impact to long term goals.
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