Why Jeff Warshaw Believes His Deal Was Good For The Industry

Two days ago Connoisseur Media CEO Jeff Warshaw announced he was leading a management buyout of Perot Holdings, which invested in his company four years ago. Yesterday Radio Ink dug deeper into the story with Warshaw who believes the deal he announced this week is good news for the entire radio industry.

Radio Ink: Why is the announcement you made this week good for your company and its employees? How and when will employees eventually own the company?
Warshaw: This is an exciting opportunity for the company for numerous reasons. First of all, it creates instant ownership for some of the senior management team. From Day 1. Between myself, Mike Driscoll, and a handful of managers, we own 91% of the company. We have control of our own destiny. Furthermore, we will be enabling many other of our colleagues in Connoisseur to benefit from equity that is created. The entrepreneurial spirit is thriving within Connoisseur. Look at our Billings market: our longtime Market Manager, Cam Maxwell, has done a great job. As a result, he is now able to purchase this terrific cluster from the company.

Radio Ink: What will Connoisseur look like in 3-5 years if you had your choice?
Warshaw: Over the next 3-5 years, I’d expect Connoisseur to religiously pay down debt, make prudent and strategic acquisitions, attract the finest media talent, develop and implement winning campaigns for its clients, create compelling programming for our listeners, and be dedicated community servants. In other words, Connoisseur will be Connoisseur!

Radio Ink: You were not happy with our headline yesterday. Why?
Warshaw: I thought the headline missed the real story — that Connoisseur is now owned by its founders and managers. It is a tremendously positive story for the industry, and should give hope and inspiration to radio entrepreneurs who dream of owning their own business. I’m sorry to say, one less radio investor is hardly headline news.

Radio Ink: Why did Petrus exit after only four years? Was that always their plan or was this something you wanted and pushed for?
Warshaw: Petrus exiting radio right now was not the plan four years ago, and was not the plan six months ago. Over the past four years, Connoisseur halved its leverage. We did that by relentlessly paying down debt and making accretive strategic moves. Having a company with modest leverage and nimble operations created optionality for us. When it was announced that Petrus’ Steve Blasnik was retiring, I asked my partners if they’d be willing to sell us their interest. They gave me a price, I gulped, and then agreed to pay it. This was only possible because we had de-levered so much, and because we enjoyed a phenomenal relationship with Petrus. They were great partners, we would be honored to partner with them in the future.

Radio Ink: Executives in the radio industry complain investors want nothing to do with radio. Why is it that radio cannot find interest if it’s still a strong business that throws off a lot of cash flow in a crowded marketplace?
Warshaw: There is a healthy market for radio debt. Investors are not as enthusiastic about radio equity. This isn’t surprising, just look at the performance of radio stocks. Although radio has strong cash flow, valuations have suffered for several reasons. First of all, radio companies have been highly leveraged. The industry faces threats from multiple directions, most notably digital. We have, as an industry, been guilty of over-promising and under-delivering. But if radio can put together a couple years of solid growth, investors will respond. As most people in the industry have probably noticed, I have been a vocal proponent of lifting the ownership caps. If radio were given relief from these onerous and outdated shackles, it would enable the industry to be stronger. We would be more able to try new formats, perform more community service, attract better local talent, reduce spot loads, invest in more training. And attract more capital.