According to Max Drachman, CEO of Drachman M&A Co., the general M&A market is as hot as he has ever seen, especially in the tower space. Closing deals is as much about evaluating buyers as it is maximizing valuation.
“Getting the best price is obviously of paramount importance to a seller,” Drachman said. “But a divestiture process has so many more important elements. When you’re selling assets in the tower space and have 20 different buyers in pursuit, you really need the experience and knowledge to spot the group that showed up with their spears sharpened and ready to pack something off the mountain.”
Drachman is no stranger to seeking out challenges. While working at a mergers and acquisitions firm established in broadcasting, he charted his own path in Out of Home (OOH) M&A transactions (think billboards or bus wraps). Transactions in the beginning were fewer and further between however his brand grew and he ended up selling Waitt Outdoor to Link Media for $82,000,000 among several other notable transactions.
“I could just feel OOH and towers taking off and I saw that those two business lines were going to do really well into the future,” Drachman told Inside Towers.
This led Drachman to take on another, bigger challenge. He went out on his own, starting Drachman M&A Co. His new company provides acquisition and divestiture representation, but most clients engage them to sell assets. The team comprises of Jenni Keatseangsilp, MBA, MEd, Chief Operating Officer; Ty Hartman, Managing Director; and Elise Alvarado, Analyst.
“By starting my own firm, I knew I could move further faster, focusing on those two dynamic bases and dedicating all of the resources of a company toward those two asset classes. We also have the flexibility to pivot into new growth verticals” he said. A significant portion of their business comes from referrals and returning clients. “We are about to launch a platform opportunity in the energy sector, and although we are new to that space, the owner placed their trust in us because of our highly successful divestiture of their towers.”
Notably, a billboard is like a tower in terms of having steel in the air, lease income, and a land agreement. The land agreements are similar as well, consisting of ground leases, easements, or even fee simple ownership. There are also similarities in terms of the due diligence process. Overall, the buyers tend to be different, according to Drachman, although there is some overlap. Drachman recently sold InSite MediaCom, an Outdoor platform with assets spread across six states in the southeast, owned by Randy Smith. Randy is the former CEO and co-founder of Telecom Towers, which was one of the largest independent tower companies in the United States at the time of their divestiture to American Tower.
Assets in both spaces are very desirable, according to Drachman. However, while a billboard asset may get offers from 10 different potential acquirers, it’s at least double that for towers.
“If we don’t get 20 offers on a tower asset, it’s a surprise, and the valuation multiples are about double as well,” Drachman said. “For OOH assets, we generally sell assets from 10 to 15 times cash flow; whereas, in towers we get multiples of 20 to 35.”
When the tower industry was gearing up to provide small cells, many thought billboards would be perfect locations for wireless sites. Some tower companies have master lease agreements to market billboards as cell sites. Drachman believes that vertical has yet to flourish.
“I’ve done over a billion dollars’ worth of OOH and other media deals, but I can’t remember the last OOH deal that had cell revenue on it,” Drachman said. “It has not proliferated yet.” However, there are signs of life. Specifically, one of the deals he closed at his previous firm was selling the largest independent billboard company in Boston to a tower company.
Drachman likes the one-on-one relationships he develops working with these companies, plus the challenge of solving highly complex problems every day from the beginning of a transaction to close.
“It’s a very interesting process that requires 100 percent commitment from a team to get a deal done. After many years and transactions, you would think that I wouldn’t be surprised daily, but new obstacles constantly pop up. Seeing it through to closing is a very satisfying result for us,” Drachman said.
One differentiator for Drachman M&A Co. is its knowledge of the major tower companies, as well as the smaller players, according to Drachman. “We’ve sold them towers before, and in some cases, we’ve even sold outdoor assets to them,” he said. “So, we get access to a broad array of buyers.”
Speed is another defining attribute. Being more specialized and boutique in size, Drachman M&A Co. can start a divestiture process within 24 to 48 hours of receiving a signed engagement letter. Offers begin to come in within a couple of weeks and closings take place 30 to 60 days thereafter, depending on title or other diligence requirements of the buyer.
Perhaps the most important distinction of Drachman M&A Co. is the trust that its clients place in it. “Maintaining a reputation of integrity in all of our transactions allows buyers pursuing our engagements the ability to move forward without looking over their shoulders, and our clients sleep well knowing their assets are in the hands of the most capable deal team in the industry,” Drachman said.
By J. Sharpe Smith Inside Towers Technology Editor