(By Deborah Parenti) Over the years, David Benjamin has launched, operated, and sold two successful radio groups. Today, he presides over Benjamin Media Investments, which is focused on investing in radio deals. What criteria do investors look for in placing their money?
How is the radio investments market this year?
At the recent NAB, most brokers claimed that their available inventory of stations remained very thin. Even discounting for the restructurings that may take place, my guess is that there will be more mid- and small-market clusters available this year than in 2016. Among other reasons, there exist a number of mid-market companies controlled by private equity firms where investments are already well past their “sell by” dates, and, at least in my discussions, most of these firms do not see any significant revisions to multiples in the near or medium term.
Comparatively speaking, what’s the view on radio vs. other media?
Views about the future of radio differ in the investment community, but in general, radio is certainly considered viable, an important component of the local media mix, but not likely a high-growth business.
What criteria do you look for in an acquisition?
In the mid-size and small markets where we focus, we look for clusters with strong, defensible market positions and quality local management teams. Turnarounds are a viable strategy, but not ours. Naturally we have to be able to buy at a price where we can earn a reasonable rate of return. Let’s face it: Few people have made money investing in radio over the last decade, and potential equity capital sources are acutely aware of this.
How do current major-group solvency issues impact private equity and bank interest in radio?
Over the last couple of years a number of commercial lenders have returned to the industry. Most of these lenders are experienced with radio and appreciate its good margins and reasonably consistent cash flow. While banks are lending, the debt-to-cash-flow multiples are less than in prior years, which is healthy.
Although there have been a few exceptions, the radio industry has been pretty much of a disaster for private equity over the past 10-12 years. Private equity players have been involved in the demise of two of our largest companies. Those investments were tragic for thousands of dedicated employees and the limited partners in these firms, as well as for the overall reputation of the radio industry. This experience (replicated in many smaller deals), coupled with radio’s modest rate of growth, makes it currently a hard sell for PE investors.
If any of the big groups go bankrupt and/or begin selling off stations, how might that affect deal potential?
How bankruptcies, recapitalization, or other modes of restructuring might affect radio deal flow is an unknown and will depend on the details of each situation. I really cannot speculate. The same is true with respect to pricing, though it is hard to see it as a plus.
Having built two impressive radio groups, you know what it takes to run them. What’s a recipe for success?
Success in radio is dependent upon quality people, solid market positions, a prudent capital structure, and honesty with employees and clients. Easy to articulate, much harder to execute.
What attracted you to radio?
I caught the radio bug early, in high school. Like many in that era, I was glued to my transistor radio and the great talents of the day. I couldn’t wait to try it myself in high school on our tiny 10-watt station that “blanketed the campus.”
After business school I worked for one of the great media companies, Time Inc., which owned a significant radio and television group at that time. I used those days to learn the business and financial aspects of the industry, and at age 27, headed west with a partner to start our own radio company in Oregon. That one small station grew into Community Pacific Broadcasting, which we ultimately sold to Capstar in the late 1990s. A couple of years later, with some of the same partners, we founded Triad Broadcasting, which was held for many years until its sale to Alpha in 2013.
I must still be a little restless. With Benjamin Media Investments, LLC as an investment vehicle, I’ve got some wonderful partners, and we are exploring a number of potential radio deals. It has been a rewarding and exhilarating ride, which I continue to enjoy.
Deborah Parenti is Publisher of Radio Ink. She can be reached at email@example.com