In 2006, Jim Leven and Bruce Mittman came together to form the broadcast group Community Broadcasters, with the goal of being the voice for the community in small and mid-sized radio markets. The duo’s primary area of focus has been in the Northeast, but recently they’ve expanded into the Southeast with the acquisition of 12 South Carolina radio stations from Miller Communications.
- A booming retail sector and business-friendly government regulations make the Southeast a great environment for businesses, specifically those in the radio industry.
- From a radio industry buyer’s perspective, the acquisition process doesn’t vary much from region to region. In addition to considering financials, there’s an increased focus on facilities and people.
- The current landscape of the broadcast industry means there’s likely to be more M&A opportunities in the future.
Q. Community Broadcasters is based in upstate New York. Your acquisition of 12 Miller Communications radio stations in South Carolina marks your entry into the Southeastern U.S. market. Tell us why you considered—and ultimately invested in—stations in the Southeast.
Jim Leven: Investing in the Southeast was something we toyed with, but we originally intended to remain regional. When we took a look at what the Southeast has to offer, we found it’s a very business friendly area in terms of taxation, corporate rules and regulations and population growth. It is certainly a much better business environment than what we have in New York. Plus, South Carolina is a right-to-work state, and there’s a fantastic pool of potential employees who are eager to work. That, coupled with the opportunity to acquire assets at an attractive price point, is what led us to the Southeast and the Miller acquisition.
It’s been wonderful so far. The people in the area are nothing short of delightful and welcoming, and because each of the markets where Miller had a presence appears to be demonstrating great growth, there are boundless opportunities.
Bruce Mittman: One of the things we look at first is the business climate. Is it a growth market? Is it in decline? What does the infrastructure look like? Is it a good environment to do business in? Like Jim said, there’s a very good business climate in the Southeast, and particularly in South Carolina. Plus there’s transportation infrastructure and a wide diversity of industries in the region, including a very robust retail industry in South Carolina, the sector from which radio derives most of its revenue. When you put a good infrastructure together with a healthy business environment, you’ve got the makings of a very positive radio opportunity.
Q. As a buyer – how did you prepare to acquire a Southeastern business?
JL: Radio is a federally regulated industry, so the process is fairly similar to acquisitions in other regions. When acquiring a business outside of our home region, we have found scheduling and travel present the biggest hurdles. Other than that, you evaluate the business based on how it compares to industry standards and what the investment will do to enhance your enterprise. The due diligence process doesn’t differ much from region to region.
BM: Really, the acquisition process and the strategies involved are going to be similar no matter where you’re looking. For us, the biggest difference in the Southeast would be things like picking up on the nuances of the community you’re working in and identifying key players in the region.
Q. What were you looking for in your investment? What drives the decision process?
JL: This deal presented the opportunity to take underperforming assets and transform them. We’re expecting to see great internal return on investment here.
BM: The first view of a transaction boils down to financials. We look at balance sheets, cash flow projections and what kind of returns we can get. After that, we look at the facilities themselves. From a radio perspective, this means asking questions about the broadcast signals, the condition of equipment and other resources. Finally, we’re interested in the people. We look for talented people with unique skillsets who are bringing something fresh to the table.
Q. What does the M&A market look like in the small and medium-sized radio markets?
JL: Broadcasting is a wonderful business. A well-run broadcast station should operate at over a 30 percent margin. In the radio business, the inventory is time and air, so at a certain point most everything you make drops to the bottom line. There’s been some trade press that has maligned the industry, but people still see tremendous value in it. Radio reaches 253 million Americans each week. If anything, radio has gotten stronger over the years.
From an investment community’s perspective, it’s attractive to people because cash flow is strong, margins are high and there’s great growth potential. The industry is in a great position, and certainly much better than five years ago. It’s been steadily improving since 2011 and it’s a good time to be investing in radio. Overall, it’s a robust business and there’s adequate trading going on.
BM: The small and mid-sized radio market has a very bright outlook for the future, especially in the Southeast. Major cities tend to be highly populated and highly competitive, and we believe the entrepreneurial opportunities in America are in small and mid-sized markets. That’s where we’re going to be seeing activity in the next 10 to 15 years. The Southeast is a high-growth area and cash flow is a bit more consistent in the Southeast, so it’s poised to become a real hotbed of activity going forward.
Q. Any general tips for buyers looking to acquire a business? Any strategies to ensure a smooth transition following an acquisition?
JL: Do adequate due diligence. Make sure the assets are as advertised and the price you’re willing to pay for those assets is low enough that you can afford to operate in a way that will enhance the business.
BL: When you’re acquiring a business, you can’t go in and fire people. In this particular instance, we’ve kept Harold Miller [the owner of Miller Communications]. He’s a wonderful guy and a much admired person in the area. Our goal is to come in and supply new funding to provide new energy. Meeting with small groups to discuss philosophy is also a great way to ensure all team members are aligned moving forward.
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