Max Drachman: The Second Half of 2021 Should Be Active

Billboard Insider talked with Kalil and Company’s Max Drachman last week to get an update on the out of home transactions market.

Max, how is 2021 shaping up in terms of deal volume?

The year started a bit slower than usual, however it is picking up in a hurry.  We have several deals under LOI for closings set to take place in the next 60 days.  The only issue facing Outdoor M&A is assets available to be purchased.  There are plenty of buyers, and everyone appears to be bullish on the space.  The second half of 2021 should be very active.

Are you seeing any new trends in the marketplace?

Yes, it looks like national is coming back pretty strong in most markets.  Local never really went away for a lot of operators, but national took a step back in major metros last year.  Looks like everything is getting back on track.

In terms of M&A specific trends, we are doing a lot more deals with rep and warranty insurance (“RWI”).  It was not nearly as common as recently as five years ago, but now it is on almost every $50m+ deal we close, and starting to be more common in the $30m+ range.  It is very useful for family businesses that do not want to deal with post-closing issues and instead pay a relatively small fee to pass any potential liability off to an insurance company.  The insurance also typically negates the need for holdbacks and sellers are able to get all of their proceeds at closing.

Now that 2020 is well in hindsight, do you see any similarities in its M&A conditions compared to the great recession? 

It was somewhat similar in terms of the general headwinds in deal volume, but the reasons were pretty much opposite.  Back in 2009-2012, buyers had a tremendously difficult time getting financing to pursue media deals.  There were lots of sellers, but few funded buyers.  That issue was compounded by the funded buyers believing they were the only ones with capital to deploy, so they were more conservative than usual.  The difference with Covid and the lockdowns is there were still plenty of buyers essentially all year.  Yes, there was definitely some market uncertainty in the early goings of the pandemic, but once most buyers became more familiar with Covid and its possible implications, they were very much on the hunt for assets.  That said, we had fewer sellers than normal.  A common theme was sellers not wanting to sell a business that took generations to build during temporary negative macro-market conditions.

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