The Billboard Insider Podcast
00:02:24 · Dave Westburg, Jim Johnsen
[00:02:24] S0: Yes. [00:02:24] S1: Younger, earlier stage, smaller companies with less efficiency and scale have sales and marketing that could be running 20% of sales, where a Lamar or an OUTFRONT may have an all in sales and marketing budget of, you know, 10%, but look at incremental sales cost or incremental sales and marketing cost on a potential acquisition somewhere between, believe it or not, as low as 2% and as high as 8%. So that does have a tendency to fluctuate billboard cash flow. [00:02:56] S0: And if I had to take an over under, I would say in and out of a bunch of business cycles, if it... You know, maybe the the average sale might be 10 times billboard cash flow. It might be higher than that for a number of factors or lower than that or a number of factors. But would that be a fair kinda use 10 as the over under and over for a good plant growing rapidly under for a bill... A wood plant with, you know, few growth prospects? [00:03:24] S1: So if we were to agree on exactly what billboard cash flow look like right now and we were to agree on whether it was pro form a or it was it was run rate or it was trailing twelve month or whatever, I'd say, you know, somewhere between ten and thirteen times is where we're seeing things go off right now. [00:03:42] S0: Mhmm. [00:03:43] S1: But, again, you know, a disclaimer to the to the user of this information is, you know, we've sold things recently as high as 13 times pro form a [00:03:52] S0: Yes.
00:03:52 · Dave Westburg, Jim Johnsen
[00:03:52] S0: Yes. [00:03:53] S1: Which may, you know, which may, if you go back on the historical data, look like more... Like a 17 or 18 times purchase, but that's not the way the buyer was looking at it. [00:04:02] S0: So Who is most active in this current market? [00:04:05] S1: Oh, that's a great question, Dave. The the pool of buyers is better than I've ever seen it. Chase... For example, JCDecaux has stepped up for its first acquisition in The US [00:04:13] S0: after Yes. I saw that. Chicago. Correct. [00:04:16] S1: Correct. They were in in a joint venture with Interstate and, decided to... And then Interstate put their half on the market with a... With an interest in monetizing it, and, they ran it through a process. And I heard it was a very closely... A very close competition, but ultimately, JCDecaux inched out the other potential bidders for it and and stepped up and and made that acquisition. Not sure it's I'm not sure it's closed yet, but it sounds like a So, Dave, besides JCDecaux, you know, another surprising chain of events has has been that Clear Channel has been active of late. I think, you know, they've they've been on a long hiatus given their ownership by iHeart and then the spinout after iHeart and and capital capital constraints. It's good to see them back in the market. [00:05:06] S0: Mhmm. [00:05:06] S1: OUTFRONT has been selectively buying, and and, of course, Lamar has always been the perennial perennial acquirer. [00:05:13] S0: And Couple 100,000,000 a year, it seems like. Yeah. At least minimum, couple 100,000,000 a year.
00:05:13 · Dave Westburg, Jim Johnsen
[00:05:13] S0: And Couple 100,000,000 a year, it seems like. Yeah. At least minimum, couple 100,000,000 a year. [00:05:19] S1: Right. Right. Pretty consistently. And I believe when, the 2021 results finally fall in or the 2022 results fall in, you're gonna see that they've stepped up even a bit more from where they were. So... And then beyond that, you've got guys like New Tradition [00:05:33] S0: Yes. [00:05:34] S1: With their purchase of Regency and then a couple follow on transactions that they did with us recently. We closed a deal with Vector recently. Branded Cities is buying. Trailhead, MH, Keystone, McWhorter, Big Outdoor, Link, Adams, Lindmark, Las Vegas Billboards, Orange Barrel, Verde Outdoor, Azalea, Tier One, Creative, and, of course, a whole host of others. [00:05:57] S0: So, Jim, you might as well say, who's active? Everybody. [00:06:02] S1: The list of actives is is dramatically better than I've ever seen it before, Dave. [00:06:08] S0: Yes. Have recession fears and the public stock sell off impacted valuations? [00:06:13] S1: You know, I would say ever so slightly. We we see a... Just a slight bit more hesitation out of the buyer community, but but but, you know, the business is good. Balance sheets are strong. Debt is still available, albeit, you know, a bit more expensive. So, no, we haven't really witnessed too much of a tail off from recession fears. [00:06:34] S0: Jim, you see a lot of deals happen. What mistakes do sellers make when they sell?
00:06:34 · Dave Westburg, Jim Johnsen
[00:06:34] S0: Jim, you see a lot of deals happen. What mistakes do sellers make when they sell? [00:06:42] S1: Well, at the at the risk of sounding self serving, David, it would be not hiring an intermediary, not hiring an investment bank or a broker. [00:06:49] S0: Why is that a mistake?
00:06:51 · Jim Johnsen
[00:06:51] S1: Well, I do believe hiring the right experts to get the job done is a great investment. I I think with with good advice, you'll ultimately maximize on the way out. And without advice, there's a tendency to either drive into a ditch or or make a bunch of mistakes or leave some money on the table. So first off, hire a good banker. You hire a banker not to, quote, unquote, find you a buyer. Mhmm. Really? In in my in my humble opinion, you hire a banker to make a market for you because we we believe here at Johnsen Fretty that by making a market for your for your company or for your... The assets within your company that you're gonna have the best possible outcome. So, Dave, beyond hiring good banker advice and hiring good legal advice and finding good tax advice when you're going to sell your company, I'd say the other thing that I've seen over the last thirty years that people do not well or improperly or or don't give enough thought to is just not cleaning the house before going to market. So what do I mean by that? I mean, you know, whether it's renewing the leases that should be renewed that you sort of just let dangle out there or failing to achieve an industrial strength permanent easement when, you know, there's certain elements, whether it be view shed or access or what have you in an easement or even just something as simple as not having all your invoices in place for the last couple years ready to demonstrate and to verify the revenue that you produced or failing to paint your structures over a series of years. I I could go on and on, but I I think you get get the drift, Dave. I mean, if if there's one piece of advice that I'd I'd lend to anybody who's thinking of selling, really spend some time cleaning the house first.
00:08:33 · Dave Westburg, Jim Johnsen
[00:08:33] S0: And I think, Jim, a good investment banker knows both sides. I think of when we did business, you were in the middle. You were able to say, you know, you may have some room here, but, you know, they really want this. So you're gonna really have to do this. And you understood us, and... But you also understood the other side when we bought the signs in Indy, and you were able to sort of be the middleman communicating, making sure that there were no misunderstandings as to which... What each party wanted in the transaction. [00:09:01] S1: Yeah. You're absolutely right, Dave. And and maybe I... You know, I've done our industry of investment bankers and and brokers a disservice by not mentioning that. But you're you're absolutely right. Part of a a good banker is being a shuttle diplomacist. [00:09:15] S0: Yes.