It’s awfully quiet out there in Deal City and Transactions Town.
What gives?
According to one key industry observer, everybody’s waiting … and eyeing the radio business’ three biggies. This insider also sheds some light on the overall atmosphere for buyers and sellers, and if any talk about Townsquare Media selling stations is just folly.
On a stormy Thursday in South Florida, there was no lounging at the pool. But, if it were up to most brokers, perhaps it would be a fine use of their time.
It’s quiet out there.
“It seems even slower than usual,” says one Washington, D.C. attorney, who notes that, while August is typically quiet Inside the Beltway as Congress is in recess, it’s a bit more dormant than at this time in 2016 — when few expected Donald Trump to become president.
Another D.C. attorney explains that the deal market is moving at a sloth’s pace because some buyers and sellers are awaiting the FCC’s movement on subcaps, and if — or when —a proceeding will hit the calendar.
It’s Doug Ferber, CEO/COO of DEFcom Advisers, who perhaps sums up the tepid transactions market best: Pricing, for sellers, is about as appetizing as a grilled hot dog slathered in mayonnaise.
“There is a gap between the bid price and the asking price, and it’s pretty great,” he notes.
That’s why many potential deal makers are looking at Entercom, iHeartMedia and Cumulus Media, and are playing a wait-and-see game based on the actions of these three companies.
With MVP Capital Managing Director Elliot Evers’ lips sealed on what stations Entercom is set to spin off to complete its merger with CBS Radio, some potential buyers have hit the Pause button.
Then, there is the “Debt-Bomb Duo,” a playful name given by some to a most serious subject — the continued solvency of iHeart and Cumulus. As Ferber sees it, both iHeart and Cumulus aren’t sellers.
“They can’t sell anything unless it’s 10-times or 11-times cash flow, because their debt is 11-times,” Ferber says. “They won’t sell anything unless they are forced to, and that would hurt them in their ability to come out of bankruptcy.”
Then, there are those who are looking at Townsquare Media and wonder what the company led by Steven Price is up to. It “has a book out there,” Ferber acknowledges. But, he quickly adds that Price says he’s a buyer — and Townsquare has “a long runway” allowing it to grow while dealing with debt several years away.
Speaking of the “book” that some have suggested puts Townsquare in a takeover position, Ferber explains, “It is something they have to do, as a responsibility to running the company. It might be to establish a value for their investors so they could be bought out.”
But, the maturity dates of Townsquare’s financing are some seven years away, in 2024.
For iHeart and Cumulus, it’s roughly 18 months away.
This has put a chilling effect on the entire marketplace, Ferber says.
Then, of course, is the bid vs. ask scenario. As they say on the London Underground, mind the gap.
“There are quite a few sellers out there, but not a lot of buyers,” Ferber says.
Lastly, Ferber says there are guys out there who are trying to get back in to radio station ownership after cashing out in the late 1990s and early 2000s, following President Clinton’s signing of the Telecommunications Act of 1996.
“I’m working with a guy now who got consolidated out at age 50,” Ferber says. “He’s now in his 60s, and he’s not ready to be on the beach.”
Yet, that’s just where deal makers may want to be through Labor Day. Barring any surprises, August’s surf won’t be serving up many transactions.
