In part two of our week-long series on the future of radio, we turn to MVP Capital Managing Director Elliot Evers to get his thoughts on where the radio industry is headed now that Cumulus is over the bankruptcy hurdle and iHeart is about to cross the finish line.
Radio Ink: How does 2019 look to you in terms of possible deal making now that Cumulus has restructured and iHeart is nearing the completion of its restructure?
Evers: I think that both those things are positive events. I don’t know that they are catalytic events, but they are positive events. Cumulus still has a fair amount of debt so any acquisitions they may do will have to be creative. Too early to say for iHeart, they don’t really need to do any acquisitions, they’ve got a pretty nice footprint already. I think it’s an important event in the industry’s path toward right-sizing. We haven’t seen a particular uptick in deal-making. That may largely be because prospective sellers are waiting to see what happens with dereg, which is a much more significant event than iHeart or Cumulus coming out of bankruptcy.
Do you expect Cumulus or iHeart to start to sell off any stations in 2019?
Evers: Not in a material way, no. Their balance sheets are now probably right-sized. I know everybody thinks that’s going to happen, that’s the point of bankruptcy, that’s a misperception that assets are going to be sold. You know you don’t sell assets when your footprint is critical to your operation if you can reduce your debt load to the point where you can take care of the debt, then why do you need to sell assets? There may be some selective trimming in smaller markets, there may be some trading. If dereg comes in there is going to be a ton of that as people move to play to their strengths and abandon their weaker markets.
Radio Ink: Do you believe Townsquare is in radio for the long haul?
Evers: I don’t have an answer for that. They seem to have pivoted, their focus on events and digital seems to have diminished; they do seem to be back focused on radio more. I think their sponsors would be happy to have an exit; I don’t think there is an exit for them in the near term. Maybe that would sit in a category of a company that waits for dereg to see how that plays out.
Radio Ink: What are you hearing on the deregulation front?
Evers: If we see the kind of deregulatory suite that the NAB has advocated, there will be a frenzy of deal-making. I think there is a goodly number of sellers, basically sitting on the sidelines saying “you know, I think I’ll wait for dereg and I’ll have more opportunities with a deeper buyers pool.” Swapping around so you get your full complement under a new set of rules, and you’re moved out of your markets where you’re light, that’s going to be a compelling phase. If dereg comes to pass that way it’s going to create a ton of activity.
Radio Ink: Any chance of any blockbuster deals in 2019?
Evers: It doesn’t feel like there’s going to be, I will say that. You have to take a step back and look at the industry. Unlike the 2008-2009 crisis when we had a lot of what I would call “unnatural owners” — those being lenders or private equity shops who found themselves with broadcast assets that they really were not intending to own for the long term. Now things have settled down a fair amount and assets have ended up in the hands of “natural owners.” Most companies’ balance sheets have been right-sized, the stations are in the hands of those who want to own them and know what to do with them. They are looking forward to a healthier industry moving forward, post dereg.
Radio Ink: Look into your crystal ball. Who will be a much bigger company in 2020 than they are in 2019?
Evers: Not Alpha, I don’t think Entercom or Beasley are particularly inquisitive, iHeart is pretty much tapped out with DOJ limits in most of their markets; they don’t have much speculation capacity or room. Townsquare I don’t see as inquisitive; the street doesn’t seem all that enamored. They have a balance sheet that is okay, but won’t permit them to do a lot of stuff. Same with Cumulus. The shape of dereg is so impossible to predict. I don’t know if any company in the industry is going to be meaningfully larger. Dereg could see two of the big guys merging, but until dereg takes shape there is no obvious candidate. There’s just not enough fresh, unleveraged capital in the industry to make that happen.
Reach out to Elliot Evers by phone at 415.391.4877 or e-mail [email protected]
Read Part One of our series with Eddie Esserman HERE
