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How do you buy radio stations?

M

MikeBratton

Guest
I'm sure this is an idiotic question to many, so please forgive me in advance, but here's the deal...

Where I live, there are some radio stations for sale. Their asking price is obscene, but it's just that--an "asking price." A group of folks is interested in forming a company that would purchase these stations. (I've done everything from weekend overnights to station management over the past 17 years so I may, or may not, be a part of it.) There is a boatload of venture capital available.

How do you get the ball rolling? What are the rudiments of the process?

Thanks for any assistance and/or wisdom you care to pass along.
 
Mike Bratton said:
I'm sure this is an idiotic question to many, so please forgive me in advance, but here's the deal...

Where I live, there are some radio stations for sale. Their asking price is obscene, but it's just that--an "asking price." A group of folks is interested in forming a company that would purchase these stations. (I've done everything from weekend overnights to station management over the past 17 years so I may, or may not, be a part of it.) There is a boatload of venture capital available.

How do you get the ball rolling? What are the rudiments of the process?

Thanks for any assistance and/or wisdom you care to pass along.
Click to expand...

Prices for a station are not unlike prices for houses. In prime neighborhoods, there is a premium on a house, and radio is prime as there are limited licences. Usually, price is based on a multiple of cash flow (10 to 14 times being the norm these days) plus assests like real estate. If the station is not profitable, anything is negotiable, but should be based on the investment, working capital and how hard the turn around is.

You will likely need an FCC attorney. The NAB has lists, as may your state broadcasting association. This will be needed to file transfer applications for the station licence, and all other licences, like remote pickups and STL transmitters.

The FCC attorney may only do the transfer, or may work with a local attorney on the sale contract. Since the FCC is quite specific on some terms of sales, it is good to work witht he FCC attorney right from the start, and the local one to comply with local laws.

To get any financing, you do due diligence to inspect the books, leases, any liabilities (is there chemical spillage under the transmitter site?) and the condition of equipment. If you are not qualified, get some company like BIA to do this for a fee. A braodcast loan seldom is granted without outside appraisal and due diligence. It also protects you form ugly surprises, whether they be PCBs or some hidden liability.

I hope this serves as a start. If you have any questions, ask them. It is an itneresting subject, but remember, every sale is unique.
 
XTalker said:
Have lots of money! And friends with lots of money!
Click to expand...

Amusing remark, but there are many stations available quite cheap... well under a half million, in fact. If you consider the average cost of a home in a top 50 market is around $300 thousand, that is not a lot of money.

Most at that price are marginal, or turn arounds or daytime AMs or small market. All such cases have been known to be profitable for a good operator. Cheap stations are mostly "guaranteed lifetime employment" but, again, so are most small businesses.

The SBA loans in these cases, so it is doable.
 
Question for David Eduardo. What is the current FCC policy on transfer applications? What are they looking for and what is the difficultly factor?
 
GlennSummers said:
Question for David Eduardo. What is the current FCC policy on transfer applications? What are they looking for and what is the difficultly factor?
Click to expand...

In today's deregulated environment, about all you need is to meet citizenship and character qualifications and have hte money. There is really no other qualification of purchasers.
 
I was looking to purchase my own small market station in the future, but at this time I cannot see where the financing will come from. How likely is it to be able to get a $300k or more loan on a small market?
 
gunterm said:
I was looking to purchase my own small market station in the future, but at this time I cannot see where the financing will come from. How likely is it to be able to get a $300k or more loan on a small market?
Click to expand...

You could probably contact the SBA, which would be the source of choice for such a small station. They are, by my experience, going to look at how much capital you will contribute (probably 30% minimum) and your broadcast and business experience. Otherwise, you would have to provide collateral beyond the value of the staiton, such as home equity or securities.
 
Financing lies in the foundation of your business plan, not just the assets of the station. Hard assets do count along with current business levels, and your plans for increasing that business. Now just writing down your ideas i not enough - you must have some reasonable foundation for the numbers.

You will want to talk about your format, how you would improve the existing product and provide foundation for those ideas. There is a lot of format research material available through the trade magazines. You can find trends on your format around the country and show the potential lender that you have done some homework.

Your background and experience in broadcasting with be of value as well - depending on the depth of that experience, of course. If you have no broadcast experience, general business experience is helpful.

Let me suggest you contact the SBA or your local community college. In NC and lots of other states, community colleges have small business assistance programs and can help you with the basic business items. Here they have a corps of retired executives who volunteer their time to help people get businesses started. They will help with business plans, local business licensing rules, etc.

One other idea for financing - silent partners! Approach a couple of the station's best advertisers and see if they would invest. The community college can also likely help you find some local folks who might invest in your venture.
 
gunterm said:
I was looking to purchase my own small market station in the future, but at this time I cannot see where the financing will come from. How likely is it to be able to get a $300k or more loan on a small market?
Click to expand...

If I may add to previous comments, in the case of small station sales, the prospect of seller financing is very real. It is likely financing the icing and not the whole cake if you get my drift.

There are also many radio brokers out there as well as at least one website with do-it yourself "classified" listings. Can I list it here? I'll chance a mod crushing and say buysellradio.com.
 
Great point about owner financing!! That would be my first choice! Just negotiate a reasonable interest rate. Sweeten the pot by trading the guy a golf club membership! You could even make him your "VP of Community Affairs" keeping him active to some degree, representing the station in the community - building that good will!
 
Sometimes, the best deals are found by knocking on doors. If you haven't already done it, identify some stations you think would fit your budget and business model, find the owner and ask!
 
Enjoying the discussion. A few observations and a reality check:

As the owner of three small market radio stations and as someone who's looked at many others but didn't buy, I have yet to find a seller who didn't want some money down (usually 25-40%) before offering terms.

Many radio stations that can be had on the cheap are cheap for a reason: they are (or recently have been) silent, have little or no revenue and have no relationship with the community leaders and busineses in their city of license.

It takes a long time, hard work and a steady amount of operating capital to keep your station going as you try to build up revenue in a small market. Plus, many affordable (distressed) radio stations have technical problems that can be expensive to fix, particularly AM's with directional antenna arrays that have been ignored.

You'll have a challenging road ahead turning it around -- harder in small markets because of the limited number of potential advertisers there. Remember: Format, on-air sound, community involvement, technical issues and FCC compliance ARE important once you buy your station. But the best-sounding small market station in the world can't be sustained without advertiser support and good sales people.

That said -- there are several affordable and profitable "beginner" stations out there for sale -- the key is making sure you know everything about that station (financials, advertisers, market acceptance, condition of antenna and transmitter, leases etc) before negotiating a deal.

And you'll probably have to move from where you live now. I live in a state with a large number of radio stations, yet good deals are rare.

STILL -- I don't want to discourage anyone who has a dream of ownership from going for it. Your talent, enthusiasm and drive are vitally needed in radio today. And it's truly a liberating experience to be your own boss.

Owning small market radio stations has been a lot of fun for me.

I hope it's fun -- and profitable -- for you.

Best of luck!
 
XTalker said:
Sometimes, the best deals are found by knocking on doors. If you haven't already done it, identify some stations you think would fit your budget and business model, find the owner and ask!
Click to expand...

This is true. I had one station owner with whom I used this direct approach respond with an offer. Unfortunately, he wanted too much and wouldn't budge.

But another possibility is to contact people or companies who have CP's. Many would be interested in making a quick sale rather than building out the facility. Using the FCC's database I've contacted (by e-mail) a few people who have CPs in areas of the country that interest me and have gotten some positive response.

Now if I can just convince my wife...

db
 
Usually, price is based on a multiple of cash flow (10 to 14 times being the norm these days) plus assests like real estate. If the station is not profitable, anything is negotiable, but should be based on the investment, working capital and how hard the turn around is.
Click to expand...

I've seen situations where stations with negative cash flow are sold at something like 2x gross revenue.
 
When my partners and I were looking for a station to purchase, we put together a listing of stations in markets in which we were interested and stations we felt we good prospects. Then, we composed a letter stating our intentions and asked if they'd be interested in selling. We sent out about 600 letters and received several replies. We ended up nearly buying a station in Chattanooga, TN. That fell through at the last minute when the owners changed their mind. So, we sent out more letters and ended up purchasing an AM in Little Rock, Arkansas. We sold it last year using buysellradio.com and an attorney they recommended.
 
A staion in need is a friend indeed...or something like that. Check out distressed stations for bottom fishing and deals. Some of these owners must sell or lose the license permanently. Their backs are up against the wall, and you're their savior.

It's updated monthly. Good Luck!

http://www.fcc.gov/mb/audio/status/silent.html
 
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