• Synergy is overrated.

    “Synergy” will be cited as a rationale for Netflix’s bid for Regency Outdoor.  Synergy is a buzzword executives use when they’re not sure how 1 plus 1 makes 3.  Synergy is overrated when it involves combining an OOH company a dissimilar business.

    Remember the “sight and sound” synergy which justified the CBS purchase of outdoor assets and the iHeartMedia combination of out of home and radio?  The theory was that you’d hear an ad on the radio and see the ad reinforced via billboards.  It failed because sales reps weren’t given incentives to cross-sell.

    Here are some OOH combinations which work.

    • An out of home/radio station or newspaper group combined plant with one budget and one single sales force (e.g. Mollman Media/Mollman Outoor or Times-Shamrock Outdoor).  One budget and one chain of command aligns everyone’s incentives.
    • An on-premise sign business/OOH company (think Yesco, Avery Bros, Arrow Sign company or Carlson Signs).  On-premise activities create billboard development opportunities.
    • A real estate development firm/OOH company (Marin Ventures, Salt River).  Real estate development create billboard opportunities.

    Synergy doesn’t work in big companies with organizational silos where people argue over who gets paid.

    Here’s a thought experiment.  Who will generate the highest cashflow from the Regency assets:  Reed Hastings or Sean Reilly?  Bet you said Sean Reilly.  Expertise trumps synergy every time.

    Is there synergy between out of home and other industries?  Let Insider know using the form below.

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