Huntington Outdoor President Justin Powell comments on a recent Billboard Insider article.

This caught my attention: “We are selling towers for 20–30 times tower cash flow, and typically get over twenty offers per engagement.” Why aren’t billboards selling for multiples like this?

Insider’s take:  Out of home assets typically trade at 8-14 times billboard cashflow.  Out of home multiples are lower than tower multiples because out of home is riskier and more complex.

Out of home assets are riskier.

A risky asset will sell at a lower multiple because there is more volatility to future cashflow.  Out of home ad revenues are cyclical and fall significantly in a recession.  Tower assets are non cyclical and have stable demand.   Look at the revenue change for American Tower versus the Big Three US out of home companies in the first 9 months of 2021.

Out of home is more complex.

A tower company is real estate plain and simple.  Leases are long term so you don’t need much of a sales staff.  Leases are triple net so margins are very high.  Out of home is real estate and sales and creative and data and production.   Many more moving parts and a harder business to execute well.  Look at how much higher American Tower’s cashflow margin compared to the cashflow margins of the Big Three out of home companies.

Why do you think tower companies are valued at a higher multiple than out of home companies.  Let Insider know using the form below.

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