Depressed Multiples in Radio and TV
In the early 1990s, the principals of Max Media, Gene Loving and John Trinder, were looking for a partner to provide equity capital for a build-up in the radio and television broadcasting industry. They believed the advertising recession of the early 1990s created an opportunity to acquire single stations or small station clusters at relatively low multiples of depressed earnings. Moreover, because of the favorable regulatory environment and the easing of broadcast ownership restrictions, Gene and John believed there was an arbitrage play by aggregating a number of smaller stations into a larger entity and then selling to a sizeable strategic buyer.

After studying the radio and television market, we decided that not only was there a tremendous opportunity, but more importantly, Gene and John had the experience and knowledge base to successfully execute the strategy. As a result, we entered into a 50/50 joint venture with them in 1992.

Built from Scratch
Max Media was essentially “built from scratch” with the first acquisition in 1992 of a single radio station in Hampton Roads, Virginia. Over the next four and a half years, we invested $24 million and completed 9 acquisitions—eventually building a company with nine TV stations and seven radio stations in nine different markets, with just under $20 million in broadcast cash flow. However, Gene and John were not satisfied to simply aggregate properties and bet on an arbitrage play. Instead, they made significant operating improvements at each property and in many cases replaced station managers with managers they had worked with for years. Therefore, Max Media’s broadcast cash flow benefited not only from an industry turnaround, but also from significant operational improvements.

Successful Sale to a Strategic Buyer
By 1998, we had built a sizeable group of attractive properties. Because of the easing of ownership restrictions, the rebounding advertising market and Max Media’s operational improvements, a number of strategic buyers were interested in acquiring the Company. We eventually sold Max Media to Sinclair Broadcasting for approximately 13x broadcast cash flow—a substantial premium to the 8–9x multiples we paid to build the Company.