bNET
By Steve Tobak | August 25, 2011
If you work for one or live with one, I guarantee you’re not going to like this post. But like it or not, the characteristics that make control freaks insufferable jerks may be the unwanted flipside of what makes them natural leaders.
Now, before you hit the delete key or flame me, note that we’ve spent quite a bit of time on the negative qualities of control freaks, i.e. that they’re typically overly demanding, micromanaging, bullying, untrusting, aggressive, compulsive, paranoid, stress monsters.
Even worse, their self-image doesn’t begin to comprehend what a pain in the butt they truly are. Nevertheless, control freaks can and often do make very good, successful leaders. Why is that one of the best-kept secrets in the business world? Two reasons:
For one thing, control freaks tend to keep pretty busy, well, controlling, running companies, bossing people around, and generating gobs of free cash flow. And, as I said, they probably don’t even know what they are. So they’re not talking.
Also, just about everyone with something to say about control freaks and leadership is either pandering to the masses of oppressed workers to promote a book, has limited real-world leadership experience, or both.
Not me. I’ve got no skin in the game, point to prove, axe to grind, bone to pick, and more to the point, no book to promote. I’m just here to offer insights into the types of people you’re likely to run into in the workplace and how to deal with them when you do. Also, you just might find some clues into your own behavior along the way.
In any case, here are four reasons Why Control Freaks Are Natural Leaders:
1. By nature, they’re results oriented problem solvers
Controlling and obsessive compulsive characteristics are two sides of the same coin. People with those traits can barely walk down the street or around the office without seeing one thing after another that needs fixing or can be done more effectively.
While a lot of what they home in on is trivial, some of it isn’t. Maybe it’s just probability, but sooner or later control freaks will latch onto some tough, hairy problems and, for reasons we’ll get into in a moment, they’re uniquely capable of solving them. They’re natural problem solvers.
And you know what that means? It means they really get off on fixing things and getting things done. I’d go as far as to say that accomplishing things, putting notches in their belt, are all like drugs that control freaks are addicted to. They crave it; they love it; they salivate for it. They’re naturally results oriented. That and problem solving are critical leadership traits.
2. They’ve got something to prove and believe they’re special
As we discussed in CEOs Are Just Like You - Without All the Whining, successful executives have often experienced significant adversity early in life, are unusually smart and instinctive, are natural survivors, have something to prove, believe they’re special, and can be like pit bulls when it comes to their vision.
And while they’re not special - we’re all made of the same flesh and blood - they don’t know that. And the belief that they’re destined for great things is often self-fulfilling.
Incidentally, if you ask these folks if they think they’re special, they’ll say no. Conscious thought is one thing, but on some subconscious level, they do believe they’re special. And that belief, combined with the need to prove themselves, is likely to be the most powerful motivating force in their lives.
All that goes hand-in-hand with controlling behavior, although successful executives usually learn to keep that behavior in check and delegate effectively. Nevertheless, it’s in them.
3. They’re often driven by a compulsive need to get attention and be adored
Many, if not most people who exhibit controlling behavior are also narcissistic, to some extent. I wouldn’t quite call them two sides of the same coin, but I would venture to say they often go hand-in-hand.
Like it or not, that’s a powerful drive in leadership and probably one of the most identifiable characteristics in charismatic people. Sure, genuine humility and a healthy sense of humor are also characteristics of charismatic leaders that aren’t linked to controlling behavior.
Still - and here’s a twist - believe it or not, in their relentless drive to be liked, narcissists can often do a pretty good job of faking genuine characteristics like humility and humor. That’s what drives many entertainers and comedians.
Back to executives and leaders, as long as their capability holds up, i.e. they perform and their companies succeed, that facade can go on almost indefinitely.
4. Anecdotally speaking, they’re out there in great numbers
If you read Are You a Control Freak? then you know that I’m a control freak. Not only that, but I’ve known and worked with literally hundreds like me or worse. Anecdotally speaking, I’d say a relatively significant percentage of senior executives and entrepreneurs in the tech industry and beyond exhibit controlling behavior. What percentage? I don’t know; I never counted.
Just as notable, my list would include some names you’d recognize as some of the more successful entrepreneurs and CEOs around: Steve Jobs, Bill Gates, and Larry Ellison, just to drop a few names. But for every name you’d recognize, I can list dozens you’ve never heard of. Sure, that’s just one guy’s experience, but it’s one guy with 30 years under his belt. And I do get around.
Also, have you ever wondered why there are so many books and blogs on the subject? Because, there’s a lot to write about, i.e. controlling leaders, executives, and managers are out there, and in very big numbers.
Now, I’ll be the first to admit that, in practice, those same characteristics, in the extreme, can result in some pretty dysfunctional, self-limiting, even self-destructive behavior. In the latter case, you definitely don’t want to be around - especially as an employee or investor - when that happens, that’s for sure.
Nevertheless, nobody’s perfect, there’s a natural yin and yang to the universe, and try as you might, you simply can’t have the good without the bad. Human behavior isn’t black and white; it’s a balancing act that’s measured in degrees.
Find me a leader without significant negative qualities and I’ll show you someone you just don’t know well enough or haven’t observed under the right conditions.
There simply are no ideal leaders, managers, or bosses, just as there are no ideal employees, coworkers, spouses, friends, or anything else human, for that matter. That’s just how it is, like it or not.
Tuesday, August 30, 2011
Thursday, August 25, 2011
6 Ways to Get Out of a Rut
While this essay is directed at business owners..I believe there's something to extract for media professionals in this "Same Stuff, Different Day" box. Also a good piece to share with local-direct clients. Philip Jay LeNoble, Ph.D. Publisher
The bNet Report
By Jeff Haden | August, 2011
As a business owner it’s easy to get that “Same Stuff, Different Day” feeling: Every day you face the same frustrations, same roadblocks, same employee headaches, same problems with vendors and suppliers and, yes, even customers.
And before you know it you’re in an SSDD rut.
How do you get out? It’s not easy, but it can be done.
While you can’t change what you do — you still have to deal with employees and vendors and suppliers and customers — you can change your approach.
Here are six ways to break out of your SSDD rut:
1.Get back in the trenches. Most business owners start a business based on a passion. As the business grows, though, they spend more time working on the business than in the business. (Which is usually a good thing, but not in this case.) The more successful your business, the less time you get to spend actually doing what you love. If you’re a florist with three shops, you probably spend the bulk of your time organizing and managing and firefighting and very little time creating beautiful arrangements. Take a step back and “work” for a few hours or better yet a full day. You’ll start the next day recharged… and you’ll remember why you love your business.
2.Change how you measure. We all have internal measures for how we work. Some people work based on time: “I’ll work on (this) for two hours.” Others work based on tasks: “I’ll work on this until it’s finished.” Others dip in and out of various tasks all day. Think about how you normally approach your day, and switch it up. If you tend to be time-based, switch to task mode: Don’t stop working on a task until it’s complete. If you’re task-oriented, set a time limit for a task instead. Either way you’ll be more productive. If you like to finish projects, setting a time limit will cause you to work smarter and harder to make sure you get done within the time allowed. If you like to work for a set period of time, forcing yourself to finish a task will make you more productive for the same reasons. And no matter what, you’ll look at how you work differently.
3.Eliminate five things. Everyone does things they don’t have to. Do you really review every report employees create? (More to the point, do employees really review and act on every report you create?) Some processes no longer make sense. Some guidelines no longer make sense. Look around and find five things you can eliminate: Reports, tasks, processes… anything that falls into the category of, “Well, that’s how we’ve always done things…” The more “stuff” you eliminate the more your day changes and the more time you free up to focus on what really matters.
4.Delegate five things. Face it: You hang on to too much. We all do. We’re convinced that some things only we can do. No one else has the skills, or the experience… or simply cares enough. Not true. Your employees can perform many tasks just as well as you can, often even better. One of your employees has outstanding interpersonal skills; let him work with a few key customers. One of your employees is so organized she makes Stephen Covey look sloppy; turn more processes over to her. Explain, train, follow up, then let go — and give employees a chance to grow.
5.Work with your best. I know. Twenty percent of your employees take 80% of your time. It’s natural to spend more time with struggling or poor performers. It’s also draining. Switch it up: Spend a few hours with your best employees. They’ll appreciate the attention — and you’ll be inspired.
6.Fire the worst. One of your employees probably needs to go: He’s not just a poor performer, he’s a morale killer. Or maybe one of your customers needs to go: The margins are too low and the effort is too high. Or maybe a product line needs to be cut: Doesn’t sell anymore (if it ever did), takes up valuable shelf space and a big chunk of operating capital, and trying to make it a winner drains resources from every part of your business. Nagging, long-term problems lie at the heart of the SSDD syndrome. Whatever your “worst” is, let it go. It may be painful at first, but in time you’ll wonder why it took you so long
The bNet Report
By Jeff Haden | August, 2011
As a business owner it’s easy to get that “Same Stuff, Different Day” feeling: Every day you face the same frustrations, same roadblocks, same employee headaches, same problems with vendors and suppliers and, yes, even customers.
And before you know it you’re in an SSDD rut.
How do you get out? It’s not easy, but it can be done.
While you can’t change what you do — you still have to deal with employees and vendors and suppliers and customers — you can change your approach.
Here are six ways to break out of your SSDD rut:
1.Get back in the trenches. Most business owners start a business based on a passion. As the business grows, though, they spend more time working on the business than in the business. (Which is usually a good thing, but not in this case.) The more successful your business, the less time you get to spend actually doing what you love. If you’re a florist with three shops, you probably spend the bulk of your time organizing and managing and firefighting and very little time creating beautiful arrangements. Take a step back and “work” for a few hours or better yet a full day. You’ll start the next day recharged… and you’ll remember why you love your business.
2.Change how you measure. We all have internal measures for how we work. Some people work based on time: “I’ll work on (this) for two hours.” Others work based on tasks: “I’ll work on this until it’s finished.” Others dip in and out of various tasks all day. Think about how you normally approach your day, and switch it up. If you tend to be time-based, switch to task mode: Don’t stop working on a task until it’s complete. If you’re task-oriented, set a time limit for a task instead. Either way you’ll be more productive. If you like to finish projects, setting a time limit will cause you to work smarter and harder to make sure you get done within the time allowed. If you like to work for a set period of time, forcing yourself to finish a task will make you more productive for the same reasons. And no matter what, you’ll look at how you work differently.
3.Eliminate five things. Everyone does things they don’t have to. Do you really review every report employees create? (More to the point, do employees really review and act on every report you create?) Some processes no longer make sense. Some guidelines no longer make sense. Look around and find five things you can eliminate: Reports, tasks, processes… anything that falls into the category of, “Well, that’s how we’ve always done things…” The more “stuff” you eliminate the more your day changes and the more time you free up to focus on what really matters.
4.Delegate five things. Face it: You hang on to too much. We all do. We’re convinced that some things only we can do. No one else has the skills, or the experience… or simply cares enough. Not true. Your employees can perform many tasks just as well as you can, often even better. One of your employees has outstanding interpersonal skills; let him work with a few key customers. One of your employees is so organized she makes Stephen Covey look sloppy; turn more processes over to her. Explain, train, follow up, then let go — and give employees a chance to grow.
5.Work with your best. I know. Twenty percent of your employees take 80% of your time. It’s natural to spend more time with struggling or poor performers. It’s also draining. Switch it up: Spend a few hours with your best employees. They’ll appreciate the attention — and you’ll be inspired.
6.Fire the worst. One of your employees probably needs to go: He’s not just a poor performer, he’s a morale killer. Or maybe one of your customers needs to go: The margins are too low and the effort is too high. Or maybe a product line needs to be cut: Doesn’t sell anymore (if it ever did), takes up valuable shelf space and a big chunk of operating capital, and trying to make it a winner drains resources from every part of your business. Nagging, long-term problems lie at the heart of the SSDD syndrome. Whatever your “worst” is, let it go. It may be painful at first, but in time you’ll wonder why it took you so long
Bosses, Now It’s Your Turn: 6 Ways to Get Ahead
The bNet Report
By Jeff Haden | August 22, 2011
The problem is that even though performance, not persona, is what matters most, getting ahead is at least partly based on getting noticed — and getting noticed means being different.
Here are six ways you can get noticed through actions that make you stand out from the pack.
1. Be known for something worthwhile. Meeting standards, however lofty those standards may be, often won’t help you stand out. Go above the norm. Be the supervisor known for turning around struggling employees. Be the manager who gets a higher percentage of employees promoted. Be the business owner who makes a few deliveries a week to personally check in with customers. Pick a worthwhile mission and put in the extra effort required to excel at that mission — while still meeting all your other responsibilities, of course.
2. Be first… with a purpose. Lots of bosses are the first to arrive. Great — but what do you do with that time? Organize your thoughts? Get a jump on your email? Instead of taking care of “personal” tasks, do something visibly worthwhile for the organization. Take care of unresolved problems from the day before. Set things up so it’s easier for employees to hit the ground running when they arrive. Chip away at an ongoing project that others have ignored. Whatever you choose, do it consistently. Don’t just be the person who turns on the lights — be the person who arrives early and gets things done.
3. Create your own project. Excelling at an assigned project is expected. Excelling at a project you create helps you stand out. The key is to take a risk with a project, and do it on your own time so your company or customer doesn’t share that risk. For example, (many) years ago I decided to create a Web-based employee handbook we could put on the company intranet. I worked on it at home, showed it to a few managers, but the HR manager hated it so it died on the spot. I was disappointed but the company wasn’t “out” anything — and partly as a result a few months later I was assigned to a high-visibility, company–wide process improvement team. The same works for business owners: Experiment with a new process or service with a particular customer in mind. If nothing else they will appreciate the extra effort you put into trying to better meet their needs — and you’ll stand out.
4. Put your money where your mouth is. Lots of people take verbal stands, especially in meetings. Fewer take a stand and volunteer to put effort behind their opinions. Say you think a project has gone off the rails; instead of simply showing everyone how smart you are by pointing out its flaws, volunteer to help fix it. Or if you think an employee deserves another chance, don’t just pay lip service — ask to have him transferred to your area. It’s easy to talk about what’s wrong, what should be changed, what could be improved… the people who stand out are the ones who do something about it.
5. Show a little of your personal side. Personal interests help other people to identify and remember you, an especially important advantage in large organizations or crowded markets. Just make sure your personal interests don’t overshadow professional accomplishments. Being “the guy who ran a marathon” is fine, but being “the guy who is always training and traveling to marathons” is not. Let people know a little about you; a few personal details add color and depth to your professional image.
6. Work your butt off. Nothing — nothing — is a substitute for hard work. Look around: How many of your coworkers or competitors are working as hard as they can? Very few, if any. The hardest way to stand out is to out-think and out-work everyone else.
It’s also the easiest — because you’ll be the only one trying.
By Jeff Haden | August 22, 2011
The problem is that even though performance, not persona, is what matters most, getting ahead is at least partly based on getting noticed — and getting noticed means being different.
Here are six ways you can get noticed through actions that make you stand out from the pack.
1. Be known for something worthwhile. Meeting standards, however lofty those standards may be, often won’t help you stand out. Go above the norm. Be the supervisor known for turning around struggling employees. Be the manager who gets a higher percentage of employees promoted. Be the business owner who makes a few deliveries a week to personally check in with customers. Pick a worthwhile mission and put in the extra effort required to excel at that mission — while still meeting all your other responsibilities, of course.
2. Be first… with a purpose. Lots of bosses are the first to arrive. Great — but what do you do with that time? Organize your thoughts? Get a jump on your email? Instead of taking care of “personal” tasks, do something visibly worthwhile for the organization. Take care of unresolved problems from the day before. Set things up so it’s easier for employees to hit the ground running when they arrive. Chip away at an ongoing project that others have ignored. Whatever you choose, do it consistently. Don’t just be the person who turns on the lights — be the person who arrives early and gets things done.
3. Create your own project. Excelling at an assigned project is expected. Excelling at a project you create helps you stand out. The key is to take a risk with a project, and do it on your own time so your company or customer doesn’t share that risk. For example, (many) years ago I decided to create a Web-based employee handbook we could put on the company intranet. I worked on it at home, showed it to a few managers, but the HR manager hated it so it died on the spot. I was disappointed but the company wasn’t “out” anything — and partly as a result a few months later I was assigned to a high-visibility, company–wide process improvement team. The same works for business owners: Experiment with a new process or service with a particular customer in mind. If nothing else they will appreciate the extra effort you put into trying to better meet their needs — and you’ll stand out.
4. Put your money where your mouth is. Lots of people take verbal stands, especially in meetings. Fewer take a stand and volunteer to put effort behind their opinions. Say you think a project has gone off the rails; instead of simply showing everyone how smart you are by pointing out its flaws, volunteer to help fix it. Or if you think an employee deserves another chance, don’t just pay lip service — ask to have him transferred to your area. It’s easy to talk about what’s wrong, what should be changed, what could be improved… the people who stand out are the ones who do something about it.
5. Show a little of your personal side. Personal interests help other people to identify and remember you, an especially important advantage in large organizations or crowded markets. Just make sure your personal interests don’t overshadow professional accomplishments. Being “the guy who ran a marathon” is fine, but being “the guy who is always training and traveling to marathons” is not. Let people know a little about you; a few personal details add color and depth to your professional image.
6. Work your butt off. Nothing — nothing — is a substitute for hard work. Look around: How many of your coworkers or competitors are working as hard as they can? Very few, if any. The hardest way to stand out is to out-think and out-work everyone else.
It’s also the easiest — because you’ll be the only one trying.
Private Equity Is Bullish On Broadcasting
TVNewsCheck
By Price Colman August 24, 2011 7:35 AM EDT
As many as eight of the TVNewsCheck Top 30 station groups already have private equity backing, as do several smaller station groups, and there are hints that private equity investors could be preparing for another push into the sector. “Private equity used to buy because of growth,” says an industry source involved with M&A activity. “Now they’re buying because groups are throwing off cash.”
By Price Colman
TVNewsCheck, August 24, 2011 7:35 AM EDT Ah, the good old days. Remember when private equity’s broadcast buying spree boosted multiples, stock prices and overall sector fortunes?
Those days are gone. Now it’s stormy skies clouded by reverse compensation, tight credit (when credit’s available at all) and sagging ad revenues. And oh, yeah, don’t forget the struggling economy.
But guess what? Private equity still likes broadcast.
As many as eight of the TVNewsCheck Top 30 station groups already have private equity backing, as do several smaller station groups, and there are hints that private equity investors could be preparing for another push into the sector (see chart below).
“We have seen some interest in our research from private equity firms,” says Mark Fratrik, VP of BIA/Kelsey. “Demand for our research products and services is often a bellwether.”
Although broadcast has suffered over the past several years, its ability to generate and increase free cash flow remains an attraction.
“Private equity used to buy because of growth,” says an industry source involved with M&A activity. “Now they’re buying because groups are throwing off cash.”
That points to an upsurge in M&A when the financial planets line up.
“There are still a number of station groups that are well-positioned to be acquired by talented management teams backed by private equity sponsors,” says Michael Alcamo, head of M.C. Alcamo & Co., an investment banking firm. “The consumer value proposition in broadcasting remains high. We don't yet see enthusiasm among lenders, but that will return in due course.”
Private equity investments typically carry certain conditions, a key one being the investment window, usually five to seven years. That’s why, at any given time, one private equity fund may be looking to exit a given investment while another, perhaps even from the same firm, is looking to get in.
“Private equity investors in Nexstar and LIN have been in a long time, well beyond their investment windows,” says the head of a private-equity backed station group. “I am sure a lot of those companies would like to get out. But that doesn’t mean there isn’t other private equity looking to get in. You’re always going to have this coming and going because that’s the nature of private equity.”
ABRY has been majority owner and controlling stakeholder in Nexstar Broadcasting for about 15 years, more than twice as long as the optimum investment window.
Nexstar was close to arranging a buyout of ABRY’s stake — roughly 54% economic control and 88% voting control — when news leaked, forcing Nexstar to publicly disclose it was exploring “strategic options,” including a possible sale of the company.
That was never the plan, says a source familiar with the situation. “They’re not getting any bids from anybody; they never thought they would,” the source says. “They were well on the way to financing a recapitalization of the company and take ABRY out. That approach still will work. They’re not talking about breaking up the company. They want this deal to go through.”
Prospective buyers include TPG, Oak Hill and Providence Equity, according to various sources.
HM Capital, which bought a controlling stake in LIN Media in 1998, is also said to be looking for an exit.
Nexstar, ABRY, HM Capital and LIN either did not respond to queries seeking comment or declined interview requests.
When Oak Hill, Providence, and others paid cash flow multiples of 12-14 times in the mid-2000s, it was because the math worked. Consistent cash flow paid down debt, covered the private-equity fund’s annual management fee (typically around 2%), potentially funded some reinvestment in the business and maybe even some payouts to investors along the way.
Under that model, the big payback came when investors cashed out, ideally at a higher multiple. The window’s still open on those private equity investments, so it remains to be seen how well they’ll perform.
But when credit markets shut down in 2007-09 and the model private equity liked — finance 80%, put 20% down — was no longer viable, the landscape changed and investors had to tinker with the equation.
Then there’s Sankaty Advisors, a division of Bain, that’s backing George Lilly’s plan to build a group of up to eight stations at SJL Holdings.
“In putting the deal together for the ABC stations, I was fortunate Sankaty was willing to do both equity and senior debt,” Lilly says. “I spoke to a number of private equity companies who were interested in a television investment but the question was how do you put the senior debt together."
Despite economic uncertainty, “I think there are positive vibes from equity players regarding broadcast,” Lilly adds. “The greatest impediment is bank financing. There’s enough cash out there for someone to finance the entire transaction, but it’s rare to find someone with that level of commitment.”
Cash flow remains key.
“I think the private-equity mindset for those who want to get in now is they see broadcast as a stable, cash-flow business,” says the head of a smaller station group that’s private equity owned.
If that cash flow can be enhanced through acquisitions, particularly properties with potential for growing retransmission consent fees and limited reverse compensation downside, “they think they can capitalize on that,” the source says.
Even absent that, effective management that can grow cash flow over the course of the investment can translate into doubling of profits — or better — at exit.
Here’s the working hypothesis: XYZ Private Equity buys Big Deal Broadcasting at eight times the average two-year cash flow of $100 million — that is, $800 million. Over seven years, Big Deal management doubles cash flow through JSAs, retrans and Internet revenue boosts, and greater operating efficiencies. When XYZ exits, the multiple’s still 8X, but the deal’s now worth $1.6 billion vs. $800 million at the buy-in.
Significant headwinds remain for broadcast M&A. One is constraint surrounding senior debt.
Another, perhaps more important factor, is the uncertainty over reverse compensation.
“To the extent that there are a lot of question marks around the future of our business — in addition to secular issues, spectrum, retrans and network compensation — all those things make private equity more conservative about what they think they’re going to get at the end,” Lilly says. “That leads to a fair amount of caution regarding private equity making investments right now.
“The question of what the landscape will look like in five to seven years is a major driver of why we’re not seeing a lot of deals.”
It was a near universal view, colored strongly by hope, that the M&A market would rev up in the second half of this year into the first half of next year. That’s looking less likely. “Everybody thought exiting in 2012 was the thing,” says one station group boss. “I think it will be 2014.”
Freedom and Young have effectively put the brakes on proposed deals, though Young’s for-sale sign was unofficial.
Broadcasters and investors alike are pinning hopes on a McGraw-Hill deal that will help set the valuation bar and that, in turn, will spur other deals. McGraw-Hill put its four attractive network affiliates on the block in June.
“I think that if private equity is interested at all in broadcast, that would get their attention,” says Barry Lucas, senior vice president-research at Gabelli & Co.
Lucas noted that he has a hold on McGraw-Hill stock (MHP) and owns no stock personally, although it’s possible an affiliate, GAMCO Investors, may hold shares.
“It should be very straightforward, relatively bite sized for anyone, so you could get a smaller private equity player to bring in a management team to run the stations,” he says. “There’s an opportunity to enhance what are thought to be very anemic margins and make some money.
“It’s exactly what I would want if I were private equity.”
Today, senior lenders, usually banks, typically will lend for broadcast at a multiple of no more than 3-4 times cash flow, sources say. That means if a deal is going at an 8 multiple, the buyer must be prepared to put down up to 50%.
Private equity investors with plenty of cash — and many have it — are well positioned. Others, perhaps wishing to spread the risk, might try to pull in other interested parties, forego a controlling interest for a smaller stake, or look for smaller deals.
One example of the shared risk approach: Broadcasting Media Partners Inc., an investor group including Madison Dearborn Partners, Providence Equity Partners, TPG, Thomas H. Lee Partners and Saban Capital Group. It owns Ion Media.
Among those willing to take smaller stakes is Amalgamated Gadget, which has, or had, pieces of LIN, Belo, Nexstar, Gray and Emmis.
By Price Colman August 24, 2011 7:35 AM EDT
As many as eight of the TVNewsCheck Top 30 station groups already have private equity backing, as do several smaller station groups, and there are hints that private equity investors could be preparing for another push into the sector. “Private equity used to buy because of growth,” says an industry source involved with M&A activity. “Now they’re buying because groups are throwing off cash.”
By Price Colman
TVNewsCheck, August 24, 2011 7:35 AM EDT Ah, the good old days. Remember when private equity’s broadcast buying spree boosted multiples, stock prices and overall sector fortunes?
Those days are gone. Now it’s stormy skies clouded by reverse compensation, tight credit (when credit’s available at all) and sagging ad revenues. And oh, yeah, don’t forget the struggling economy.
But guess what? Private equity still likes broadcast.
As many as eight of the TVNewsCheck Top 30 station groups already have private equity backing, as do several smaller station groups, and there are hints that private equity investors could be preparing for another push into the sector (see chart below).
“We have seen some interest in our research from private equity firms,” says Mark Fratrik, VP of BIA/Kelsey. “Demand for our research products and services is often a bellwether.”
Although broadcast has suffered over the past several years, its ability to generate and increase free cash flow remains an attraction.
“Private equity used to buy because of growth,” says an industry source involved with M&A activity. “Now they’re buying because groups are throwing off cash.”
That points to an upsurge in M&A when the financial planets line up.
“There are still a number of station groups that are well-positioned to be acquired by talented management teams backed by private equity sponsors,” says Michael Alcamo, head of M.C. Alcamo & Co., an investment banking firm. “The consumer value proposition in broadcasting remains high. We don't yet see enthusiasm among lenders, but that will return in due course.”
Private equity investments typically carry certain conditions, a key one being the investment window, usually five to seven years. That’s why, at any given time, one private equity fund may be looking to exit a given investment while another, perhaps even from the same firm, is looking to get in.
“Private equity investors in Nexstar and LIN have been in a long time, well beyond their investment windows,” says the head of a private-equity backed station group. “I am sure a lot of those companies would like to get out. But that doesn’t mean there isn’t other private equity looking to get in. You’re always going to have this coming and going because that’s the nature of private equity.”
ABRY has been majority owner and controlling stakeholder in Nexstar Broadcasting for about 15 years, more than twice as long as the optimum investment window.
Nexstar was close to arranging a buyout of ABRY’s stake — roughly 54% economic control and 88% voting control — when news leaked, forcing Nexstar to publicly disclose it was exploring “strategic options,” including a possible sale of the company.
That was never the plan, says a source familiar with the situation. “They’re not getting any bids from anybody; they never thought they would,” the source says. “They were well on the way to financing a recapitalization of the company and take ABRY out. That approach still will work. They’re not talking about breaking up the company. They want this deal to go through.”
Prospective buyers include TPG, Oak Hill and Providence Equity, according to various sources.
HM Capital, which bought a controlling stake in LIN Media in 1998, is also said to be looking for an exit.
Nexstar, ABRY, HM Capital and LIN either did not respond to queries seeking comment or declined interview requests.
When Oak Hill, Providence, and others paid cash flow multiples of 12-14 times in the mid-2000s, it was because the math worked. Consistent cash flow paid down debt, covered the private-equity fund’s annual management fee (typically around 2%), potentially funded some reinvestment in the business and maybe even some payouts to investors along the way.
Under that model, the big payback came when investors cashed out, ideally at a higher multiple. The window’s still open on those private equity investments, so it remains to be seen how well they’ll perform.
But when credit markets shut down in 2007-09 and the model private equity liked — finance 80%, put 20% down — was no longer viable, the landscape changed and investors had to tinker with the equation.
Then there’s Sankaty Advisors, a division of Bain, that’s backing George Lilly’s plan to build a group of up to eight stations at SJL Holdings.
“In putting the deal together for the ABC stations, I was fortunate Sankaty was willing to do both equity and senior debt,” Lilly says. “I spoke to a number of private equity companies who were interested in a television investment but the question was how do you put the senior debt together."
Despite economic uncertainty, “I think there are positive vibes from equity players regarding broadcast,” Lilly adds. “The greatest impediment is bank financing. There’s enough cash out there for someone to finance the entire transaction, but it’s rare to find someone with that level of commitment.”
Cash flow remains key.
“I think the private-equity mindset for those who want to get in now is they see broadcast as a stable, cash-flow business,” says the head of a smaller station group that’s private equity owned.
If that cash flow can be enhanced through acquisitions, particularly properties with potential for growing retransmission consent fees and limited reverse compensation downside, “they think they can capitalize on that,” the source says.
Even absent that, effective management that can grow cash flow over the course of the investment can translate into doubling of profits — or better — at exit.
Here’s the working hypothesis: XYZ Private Equity buys Big Deal Broadcasting at eight times the average two-year cash flow of $100 million — that is, $800 million. Over seven years, Big Deal management doubles cash flow through JSAs, retrans and Internet revenue boosts, and greater operating efficiencies. When XYZ exits, the multiple’s still 8X, but the deal’s now worth $1.6 billion vs. $800 million at the buy-in.
Significant headwinds remain for broadcast M&A. One is constraint surrounding senior debt.
Another, perhaps more important factor, is the uncertainty over reverse compensation.
“To the extent that there are a lot of question marks around the future of our business — in addition to secular issues, spectrum, retrans and network compensation — all those things make private equity more conservative about what they think they’re going to get at the end,” Lilly says. “That leads to a fair amount of caution regarding private equity making investments right now.
“The question of what the landscape will look like in five to seven years is a major driver of why we’re not seeing a lot of deals.”
It was a near universal view, colored strongly by hope, that the M&A market would rev up in the second half of this year into the first half of next year. That’s looking less likely. “Everybody thought exiting in 2012 was the thing,” says one station group boss. “I think it will be 2014.”
Freedom and Young have effectively put the brakes on proposed deals, though Young’s for-sale sign was unofficial.
Broadcasters and investors alike are pinning hopes on a McGraw-Hill deal that will help set the valuation bar and that, in turn, will spur other deals. McGraw-Hill put its four attractive network affiliates on the block in June.
“I think that if private equity is interested at all in broadcast, that would get their attention,” says Barry Lucas, senior vice president-research at Gabelli & Co.
Lucas noted that he has a hold on McGraw-Hill stock (MHP) and owns no stock personally, although it’s possible an affiliate, GAMCO Investors, may hold shares.
“It should be very straightforward, relatively bite sized for anyone, so you could get a smaller private equity player to bring in a management team to run the stations,” he says. “There’s an opportunity to enhance what are thought to be very anemic margins and make some money.
“It’s exactly what I would want if I were private equity.”
Today, senior lenders, usually banks, typically will lend for broadcast at a multiple of no more than 3-4 times cash flow, sources say. That means if a deal is going at an 8 multiple, the buyer must be prepared to put down up to 50%.
Private equity investors with plenty of cash — and many have it — are well positioned. Others, perhaps wishing to spread the risk, might try to pull in other interested parties, forego a controlling interest for a smaller stake, or look for smaller deals.
One example of the shared risk approach: Broadcasting Media Partners Inc., an investor group including Madison Dearborn Partners, Providence Equity Partners, TPG, Thomas H. Lee Partners and Saban Capital Group. It owns Ion Media.
Among those willing to take smaller stakes is Amalgamated Gadget, which has, or had, pieces of LIN, Belo, Nexstar, Gray and Emmis.
Wednesday, August 17, 2011
Entravision: Dual TV/Radio Ad Campaigns Up Reach
MediaDailyNews
by Wayne Friedman, Yesterday, 12:28 PM
Results from a TV-radio station test indicate that jointly selling radio and TV advertising together in simultaneous campaigns can increase audience reach -- and deliver near prime-time viewership levels -- all with the help of a single-source measuring system.
Arbitron Inc. and Entravision Communications, a Spanish-language media company that owns TV and radio stations, said a test with Entravision's Denver, Colo. stations showed improved audience reach. It also includes out-of-home viewing, thanks to Arbitron's portable people meter (PPM) ratings service.
The test discovered -- as other studies have shown -- that usage patterns of television and radio complement each other. From 6 a.m. to 4 p.m., radio delivers 70% to 80% of the combined television/radio audience; television delivers 80% of the audience from 7 p.m. to midnight. Each platform delivers a distinct Mediaand separate consumer.
All this offers advertisers gains by using a single-source measuring system such as Arbitron's.
Jeff Liberman, president of the radio division of Entravision, stated: "This single-source, cross-platform PPM pilot project reaffirms what we've been proving to our advertisers for years -- utilizing both radio and television is an efficient and effective way to increase reach over a radio-only or television-only advertising schedule."
by Wayne Friedman, Yesterday, 12:28 PM
Results from a TV-radio station test indicate that jointly selling radio and TV advertising together in simultaneous campaigns can increase audience reach -- and deliver near prime-time viewership levels -- all with the help of a single-source measuring system.
Arbitron Inc. and Entravision Communications, a Spanish-language media company that owns TV and radio stations, said a test with Entravision's Denver, Colo. stations showed improved audience reach. It also includes out-of-home viewing, thanks to Arbitron's portable people meter (PPM) ratings service.
The test discovered -- as other studies have shown -- that usage patterns of television and radio complement each other. From 6 a.m. to 4 p.m., radio delivers 70% to 80% of the combined television/radio audience; television delivers 80% of the audience from 7 p.m. to midnight. Each platform delivers a distinct Mediaand separate consumer.
All this offers advertisers gains by using a single-source measuring system such as Arbitron's.
Jeff Liberman, president of the radio division of Entravision, stated: "This single-source, cross-platform PPM pilot project reaffirms what we've been proving to our advertisers for years -- utilizing both radio and television is an efficient and effective way to increase reach over a radio-only or television-only advertising schedule."
Friday, August 12, 2011
U.S. Stocks Stabilize and Retail Sales are Up
The Daily Beast Cheat Sheet: Friday August 12, 2011
The extreme mood swings on the U.S. stock market seemed to have calmed down a bit as one of the most volatile weeks in Wall Street history comes to a close. The Dow jumped 97 points just minutes after the opening bell. At noon, it had climbed 185 points, or 1.6 percent. By mid-afternoon it had stabilized, holding onto modest gains. Financial, energy, and industrial stocks saw the biggest early upticks following good reports on retail sales and consumer spending.
PS Even more reason to help clients avoid making excuses why they should not expand their media marketing...Philip Jay LeNoble, Ph.D. Publisher
The extreme mood swings on the U.S. stock market seemed to have calmed down a bit as one of the most volatile weeks in Wall Street history comes to a close. The Dow jumped 97 points just minutes after the opening bell. At noon, it had climbed 185 points, or 1.6 percent. By mid-afternoon it had stabilized, holding onto modest gains. Financial, energy, and industrial stocks saw the biggest early upticks following good reports on retail sales and consumer spending.
PS Even more reason to help clients avoid making excuses why they should not expand their media marketing...Philip Jay LeNoble, Ph.D. Publisher
Retail Sales Up in July
Snapshot of Economy from AP
Finally, some good economic news. Retail sales rose 0.5 percent last month, the most they've risen since March. The government also revised sales higher for the two previous months. The numbers were better than expected, a good sign after consumers cut spending in June for the first time in 20 months. Many retailers said that back-to-school promotions had helped boost their sales in July. Target, Macy's, and Saks all reported higher-than-expected gains.
Local direct-revenues heading higher...so go help them continue or begin their branding , engagement, acquisition and retention driven campaigns using your media voice as the driver.
Philip Jay LeNoble, Ph.D. Publisher
Finally, some good economic news. Retail sales rose 0.5 percent last month, the most they've risen since March. The government also revised sales higher for the two previous months. The numbers were better than expected, a good sign after consumers cut spending in June for the first time in 20 months. Many retailers said that back-to-school promotions had helped boost their sales in July. Target, Macy's, and Saks all reported higher-than-expected gains.
Local direct-revenues heading higher...so go help them continue or begin their branding , engagement, acquisition and retention driven campaigns using your media voice as the driver.
Philip Jay LeNoble, Ph.D. Publisher
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