Have Global Acquisitions Lived Up to Expectations?

Adrian J Cotterill, Editor-in-Chief

Is it possible that Global has uncovered fraud, or at the very least a ‘distortion of revenue’ related to some of the acquisitions they made when they formed Global Outdoor back in 2018?

That anyhow, is the belief of many people who we spoke with in the UK this past week. Sources close to the matter tell us that the flag was raised inside Global when sales revenue on former Outdoor Plus inventory failed to reach the levels that the buyer “assumed had been achieved in 2018”.

Over the past few years many UK media owners have effectively inflated their sales revenue figures with a series of substantial one off payments paid into their own business by selling their site/screen leases and freeholds to the likes of Wildstone and Insite Outdoor. This is something that Outdoor Plus did in 2018, which is of course, the year that Global valued and then bought the business.

Whilst this is technically revenue to Outdoor Plus, it is definitely not sales revenue derived from selling screen time and it is most certainly not recurring revenue. We should also point out that it is not fraudulent.

It is however a bit of a problem when you value a business based on a multiple of EBITDA in one particular year. We are told that Outdoor Plus likely received, entirely legitimate payments in that year, amounting to GBP 5-7 million for site leases and freeholds.

If you then go and buy a business that has done that, at say, a 10-15 multiple, those ‘bogus’ figures will over value said business by GBP 50-75 million.

If the Global – Outdoor Plus acquisition was done, as many believe, on a handshake between friends Stephen Miron and Jonathan Lewis was enough due diligence done? It could well be, that Global paid north of GBP 100 million for either a business that was not worth what they actually paid or worse still, an insolvent business.

If you add into the dealmaking done back in 2018, the perceived value of Primesight’s LinkUK network which Global recently put into administration with attributed losses close to GBP 34 million, you can see that (although there is absolutely no suggestion of fraud or wrongdoing with Primesight) Global might have overpaid here as well.

So, with all of this in mind, was the the entire logic behind the consolidation and creation of Global Outdoor from Outdoor Plus and Primesight (September 2018), and separately Exterion Media (October 2018) inherently flawed from the outset?

It was obvious to any industry observer at the time, that only one of the three companies acquired during Global’s buying spree in 2018 was ever crucial to the buying mix – Exterion of course, by virtue of its unique proposition.

Global Outdoor’s idea of scale on the other hand has worked entirely counter to any sort of logic or reasoning …

  • Whilst it did very well under the excellent management of Naren Patel, Primesight was always a makeweight, It had similar formats to all the other media owners BUT was never a first port of call. Cynics would tell you that “Its formats were sold and bought as a rate regulator to enable agencies to beat an audit because they were so cheap and they always said yes”. LinkUK was of course Primesight’s attempt to buck that trend but anyone who had done any decent research on LinkNYC would have known that it was a media network dead on delivery
  • Many believe that Outdoor Plus always derived a disproportionate share of revenue from Talon. Many media buyers resented spending with Outdoor Plus because of that perception. Not many people will know this but it was Ocean’s Tim Bleakley and Tom Goddard who tipped the Talon scales away from Outdoor Plus. When Tim / Tom introduced their former LDC people, who had now moved on to Mayfair Equity Partners, to Talon boss Eric Newnham and they purchased Talon from Omnicom in 2017, the ‘discretionary’ Talon money that so easily floated to Outdoor Plus was, surprise, surprise redirected to the Ocean Group.

The idea of creating Global Outdoor was to build a business with a scale comparable to Clear Channel and JCDecaux. Global of course would have expected revenues to match that ‘scale’.

It may sound a bit harsh but I think there are two winners here and neither one of them is Global. The Exterion component will continue to do extremely well, just as it always did but the rest of the Global Outdoor empire will likely wither in its current state, which rather calls into question the entire purpose of ‘Global Outdoor’ and the original rational for creating it.

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