At this week’s  JP Morgan Global Tech and Media conference Sean Reilly gave a short course on how Lamar approaches M&A.

M&A

We do an awful lot of M&A.  Last year we did a little over $310 million in billboard transactions.  The average transaction size was $6 million.  So it’s a lot of little tuckins…This year we’ll do a little more than $350 million.  Just announced a great one.  Burkhart.  An old line family business.  Very typical Lamar…places like South Bend and Ft Wayne, Lafayette, places like that…

Local managers source the deals

Lamar has a flat, decentralized organization chart…My M&A team is 200 local managers.  They source the deals.  They’ve been driving by these signs for 10 years.  If you go to Little Rock Arkansas our general manager there is a guy named Tom Gibbens…there’s going to be another independent billboard company…and Tom goes to church with that person…so when it’s time to sell he calls Tom…oftentimes it’s not even a competitive bidding process.

What Lamar Pays

We’re trading at about 13.5 times EBIDTA…Year in and year out if it’s a fold in acquisition, typically we bring it in at about 10-11X forward EBIDTA contribution.  Last year things got a little frothy toward the end of the year.  That number picked up a turn…you’re talking about something in the 12ish range.

What Lamar Does

The first thing is we don’t need any of the people…we’re folding it in to an existing operation where we have an office, we have a general manager, sales manager, guys in trucks, production manager…we don’t need any of the infrastructure of the seller.  We’re really just buying billboard, billboard permits, advertising contracts and ground leases.  So it becomes a very predictable exercise…Over time there’s a little bit of magic on the revenue side.  We have access to advertisers that a local competitor may not.  Mostly it’s national.  So typically there’s a little bump in rate that we enjoy 2-3 years out…

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