Street: Few Agree on Values


While the current economic crisis may create some bargains as stock prices and corporate valuations plummet, a panel of experts at an industry conference last Thursday differed notably on the true value of media stocks .

Thomas H. Lee Partners managing director Richard Bressler said that while some of his company's media investments — Clear Channel Communications and Univision, in particular — have substantial cash reserves, the question is what would be the best use of that cash.

Bressler estimated that Clear Channel has about $2 billion in cash reserves and said that privately held Univision has “significant” cash on hand.

But Bressler said that companies have a choice in what they will do with that cash — use it for acquisitions, to buy back stock if they are publicly traded or simply cleaning up their balance sheet by paying down debt.

Velocity Investment Group co-founder Jonathan Miller said that one of the obstacles in making acquisitions is agreeing on a valuation.

“Everybody is wondering when are deals going to get done, but how do you price things?” Miller asked. “Sellers still think things are worth what they were a year ago, buyers think things are worth half of what they were a year ago. A year ago, cable networks were worth 12 times [cash flow], a fast-growing network was worth 16 times [cash flow]. What is a cable network worth today?”

Miller said that the economic crunch hasn't only affected mergers and acquisitions, it is also putting a damper on venture financings.

In the past, Miller said that venture-capital investments usually were made in three stages — the early or “angel” round, a mezzanine financing round and a final round.

“Now, anyone who says they need three rounds of financing before they break even, no one is looking at them,” Miller said. “They have to get there [break-even] in the first round our early in the second.”

While some could say that stance is stifling innovation, it is also forcing entrepreneurs to take a much harder look at their business plan.

“They have to be able to say I can carry myself all the way through,'” Miller said.

And banks, which have been curtailing lending as the recession rages on, are not expected to be any help. JP Morgan media analyst Imran Khan said that bankers have been stepping back from business lending since the late 1940s.

Khan said after World War II, 60% of lending was done by banks; by 2008, that figure had dropped to 20%.