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JUNE 2016
OOH and M&A – A Look AheadMark BoidmanManaging Director, Peter J. Solomon Company
@MBoidman
1
Providing Advice to Clients for Over 27 Years
Assignments of PJSC and / or Mark Boidman.
Mergers & Acquisitions
Advisory
Restructuring / Recapitalization
Advisory
Advisor on Public and Private Capital
Raising
Advisor to Boards of Directors PJSC
Completed over $180 billion of M&A, restructuring and financing advisory assignments
PJSC is at the forefront of media and technology
Assignments in OOH / DOOH / Digital Signage / Retail Tech have included*:
*
2
Investment by Natixis Provides Access to Global M&A and Financing PlatformIn February 2016, Natixis announced an agreement for a majority investment in Peter J. Solomon Company to serve as its U.S. investment banking platform
Global Platform
Capital Markets Expertise
Debt Capital Markets Strategic Equity Transactions
Americas EMEA Asia Pacific 2,600 Employees across all platforms
Corporate & Investment Banking offices in New York, Los Angeles, Houston, Montréal, Bogotá, Buenos Aires, Lima, Mexico City and São Paulo
Strong track record in providing financing solutions to private equity clients
13,200 Employees across all platforms
Corporate & Investment Banking offices in London, Madrid, Milan, Frankfurt and Dubai along with corporate subsidiaries in Moscow and Frankfurt
Paris houses all major divisions, including capital markets and asset management
In 2015, acquired Leonardo & Co., an M&A advisory firm in France, and 360 Corporate Finance, a financial advisory firm in Spain
500 Employees across all platforms
Corporate & Investment Banking offices in 12 countries organized around Hong Kong regional center (Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan, Thailand and Vietnam)
High performing asset management business with over $20bn AUM
Assists clients in raising capital for acquisitions, leveraged buyouts, restructurings and recapitalizations
Structure, arrange and underwrite: – First lien and second lien loans– Bridge facilities– High yield
Significant cross border transaction experience complemented by multi-currency funding capabilities
Syndication and distribution capabilities to support corporate and financial sponsor clients
Assist clients in optimizing listed equity stakes Customized structured solutions to facilitate accelerated share
repurchases Financing and risk management for equity positions, including
hedging strategies, margin loans and equity swaps Global trading capabilities Ability to structure and execute jumbo transactions
First lien and second lien loans
Bridge facilities
High yield bonds
Investment grade bonds
PRIVATE AND CONFIDENTIAL
3
POS
Source: Company financials and websites, MagnaGlobal, Outdoor Advertising Association of America, Digital Place-Based Advertising Association, FactSet and Wall Street research.
Local
Airport / Aerial / Water
Transit / Taxi
Stadium / Arena
Movie Theater
BillboardNational
Retail
Point of Care
Latin America
Background Music
Grocery
Content
Agency
Gas Station
Shopping MallHotel
Office / Elevator
Health / Personal Care
Bar / Club
Restaurant Solutions / Kiosk / Other
Smart Cities
What We Cover in OOH / DOOH / Digital Signage / POS the Americas
Canada
4
What We Cover in OOH / DOOH / Digital Signage / POS (Europe + Asia)
Solutions / Kiosk / Other
France
Spain
Netherlands
Belgium
Germany
Scandinavia
Poland
Italy
Eastern Europe
Turkey
Billboard / Outdoor Digital Out of Home
U.K.
Asia
5
Defining the Global Intelligent Visual Communications Industry2015 – 2019
Retail Technology$27B going to $40B – $45B
Digital Signage$16B going to
$22B
DOOH$11B going
to $19B
Out of Home Media
$38B going to $46B
PRIVATE AND CONFIDENTIAL
6
Executive Summary
Stability in macro fundamentals
Technology as a friend and penetration of digital
Ubiquity of mobile
Robust OOH Industry Outlook Driven By
OOH Industry Challenges
Defending / taking share of advertising spend
Measurability and demonstrating clear ROI for advertising clients
Ease of buying - buyers and sellers resisting change
PRIVATE AND CONFIDENTIAL
7
Thailand
Estonia / Latvia / Lithuania
U.K. & Ireland
Poland
Global Out-of-Home Footprint
Source: FEPE, company websites.
USA
China
Canada
France
Turkey
Brazil
Chile
Australia
Spain
`
Netherlands
Italy
Scandinavia
Mexico
Germany
Switzerland
Belgium
PRIVATE AND CONFIDENTIAL
8
Global OOH Spending
Global OOH Advertising Revenue Global DOOH Advertising Revenue
Global DOOH as a Share of Total OOH Revenue 2019 Estimated DOOH Penetration in Digital Markets
Source: Peter J. Solomon Company Wall Street research.
$36 $38 $40 $42 $44 $46 $49
0
10
20
30
40
$50
2014A 2015A 2016E 2017E 2018E 2019E 2020E
$10 $11
$13 $14
$16 $19
$21
0
5
10
15
20
$25
2014A 2015A 2016E 2017E 2018E 2019E 2020E
27% 29% 32% 34%
37% 40%
44%
0%
10%
20%
30%
40%
50%
2014A 2015A 2016E 2017E 2018E 2019E 2020E
60% 58% 56% 54%
42% 40%
0%
15%
30%
45%
60%
75%
Singapore US HongKong
UK China GlobalAverage
(Amount in Billions) (Amount in Billions)
PRIVATE AND CONFIDENTIAL
9
Global OOH Spending
2015 Global OOH Revenue By Category
Source: Peter J. Solomon Company Wall Street research.
45%
28%
18%
8%
Billboard & Large Format
Other
Transportation
Urban Furniture
2016 Estimated OOH Main Markets Spending
$9.0
$7.5 $7.2
$1.7 $1.4 $1.4 $1.2 $0.9 $0.6 $0.6 $0.4 $0.4 $0.3 0
2
4
6
8
$10
China US Japan UK France SouthKorea
Germany Brazil Australia Canada India Spain Mexico
(Amount in Billions)
PRIVATE AND CONFIDENTIAL
10
15%
8% 6% 5% 5%
4% 3% 3% 3% 3% 3% 2% 1%
0%
4%
8%
12%
16%
20%
Brazil China India Australia US UK Mexico Japan Spain Canada Germany SouthKorea
France
Global OOH Spending2016 Estimated OOH Share of Total Advertising in Main Markets
Source: Peter J. Solomon Company Wall Street research.
2016 Estimated OOH Growth in Main Markets
20% 17%
12% 12%
8% 7% 7% 6% 6% 6% 6% 5% 4%
--
5%
10%
15%
20%
25%
Japan SouthKorea
France China UK Mexico Spain Australia Brazil Canada Germany India US
11
$0.3
$1.3 $1.4
$3.3 $1.5
$0.1
$3.6
$2.8
$1.5 $1.4
$1.2
$0.9
$0.6
$0.3 $0.2 $0.2 $0.2 $0.2 $0.2 $0.2 $0.1
JCDecaux CCO OUTFRONT Lamar Focus Ströer Exterion APG|SGA Metrobus Clear Media Intersection APN oOh! Media Asiaray Russ
North America International
2015 Outdoor Revenues
Source: Peter J. Solomon Company Wall Street research.
(Amounts in Billions)
PRIVATE AND CONFIDENTIAL
12
Global Advertising SpendTop 10 Global OOH Advertisers Excluding Asia
Source: Peter J. Solomon Company Wall Street research, OAAA, Outsmart.
Top 15 Global Advertisers in 2015
(Amount in Millions)
$15.0
$12.2
$9.1 $8.3
$5.9 $5.5 $5.1 $4.3 $4.0 $3.2 $3.1 $3.0 $2.7 $2.7 $2.6
Microsoft Google Amazon P&G Comcast Expedia GM Ford Coca-Cola Nike AmericanExpress
Priceline Verizon JP Morgan WaltDisney
(Amount in Billions)
$105
$59 $51 $48 $44 $44
$36 $35 $28 $28
McDonalds Apple Warner BrosPictures
Verizon British SkyBroadcasting
Coca-Cola 20th CenturyFox
Metro PCS Geico Talktalk
PRIVATE AND CONFIDENTIAL
13
Agency buying structure
Municipalities looking for dollars
More sophisticated property owners aware of values to be extracted from OOH operators
Out of Home Advertising Investment Thesis
Source: Wall Street Research.
Considerations
Near Term Growth Strategy
Digitization / Mobile
Continued conversion into digital billboard displays
Location-based marketing and mobile ad opportunities
Adopt audience measurement and buying techniques providing accountability
Data to supplement existing OOH ratings, e.g., beacon or other tech
Ad Exchanges / Programmatic Buying
14
Current Agency Buying Structure Remains Challenge
Software platforms to OOH industry are threat to selling proposition of specialists “buying this media is hard and requires years of experience”
– Importance of data + software that increases access and reduces fragmentation; traditional OOH specialist forced to adapt or become extinct
The better the relationship = better sales. Hard to get friendly with automated platform
Sellers looking to increase demand + reduce friction in selling their media (while maintaining primary control)
– Software as the solution…not specialists
Buyers resisting changes to planning and buying OOH
Sellers have over years invested in these relationships
The industry has to adapt or stall OOH industry sales
15
Defending / Taking Share of Global Advertising Spend
Source: Wall Street Research.
More digital billboards replace non-digital signage, with more faces (debatable) More DPB networks getting deployed (most are not making money)
– Not taking share from other ad buckets, + with more faces in the marketplace, potentially only taking share from each other
Use technology to be/feel more "digital" so that OOH can attract dollars that today go into other ad buckets Approach mobile + OOH as one product to change the face of OOH attribution and put
OOH higher up in the planning as marketing mix is being determined
Potential Problem: $40B OOH ad bucket may not grow enough to offset supply
Potential Solution: “Blur the Buckets” leads to more value and better pricing
16
How many views does display get?
Impressions
New vs. Repeat
How long do they stand in front of
the display?
Duration
How frequently do people view
display?
Frequency
What % of people are new? What % have I
seen before?
OOHEnhancing Value of
Use Technology to Measure and as Bridge to Attribution
17
Attribution and EngagementMeasure the percentage of people who were exposed to or engaged with the ads and subsequently visited a store and / or made a purchase
Impressions Visit
In-Store Analytics• Storefront Conversion
• Visit Duration• Visit Frequency
• Interaction / Engagement
18
Total Global Ad Spending by Category
Source: Peter J. Solomon Company Wall Street research.Note: Total media ad spending worldwide in 2015 of $515 billion and growing to $610 billion in 2018.* Includes both linear and non-linear television. Non-linear includes non-traditional television such as Netflix, Hulu and other over-the-top programming.
($ in Billions)
3-YrCompoundGrowth Rate(’15-’18):
Traditional Media Category
OOH only traditional medium expected to show real growth
Mobile and online video = the leading advertising categories over the next few years
2015 2018
*
191
104
47
66
38 34 33
207
115 114
60 44
36 30
--
50
100
150
200
250
Television Desktop Internet Mobile Internet Newspapers OOH Media Radio Magazines
2.8% 3.7% 34.0% (2.9%) 5.0% 2.5% (3.1%)
19
Select Media Channels Trading Performance
Source: Capital IQ as of May 25, 2016.
EV / 2016E EBITDA12.5 x
11.7 x
8.6 x 7.7 x
5.7 x
Digital Media OOH Media TV / Radio Broadcasting Retail Tech / DigitalSignage
Newspapers
PRIVATE AND CONFIDENTIAL
20
13.1 x
11.5 x 10.9 x
12.0 x
EV / 2016E EBITDA
Source: Capital IQ as of May 25, 2016.
Out of Home Comparable Companies
Potential unlocked “REIT” value could increase multiple to 14.0x-16.0x in current
low interest rate environment
21
PRIVATE AND CONFIDENTIAL
The Smart Cities Opportunity For Digital Signage / DOOH is Huge…
22
Smart Cities Opportunity
Source: Frost and Sullivan, IHS Technology research and MIT Technology Review.
Smart cities represent a $1.5 trillion market opportunity in energy, transportation, infrastructure and governance
Currently 28 “smart cities” spread throughout Europe, North America and Asia Pacific
Additional 102 planned and in-progress smart cities, with 88 expected to be successfully completed by 2025
21 2428
3339
45
88
0
20
40
60
80
100
2013 2014 2015 2016E 2017E 2018E 2025E
Num
ber o
f Sm
art C
ities
23
Participants in the Smart City MarketOpportunity for OOH operators to participate in potential massive market
Managed Service ProvidersProduct Vendors Integrators Network Service
Providers
Provide smart meters and distribution devices (e.g., automated switches, voltage regulators) that operate as main nodes of connectivity
Provide integrated turnkey solutions that package together various smart city capabilities and technologies
Offer collaborative networks and enterprise working solutions that connect people, assets and systems by leveraging M2M capabilities
Offer around-the-clock monitoring, management and compliance services and on-site consulting for smart city solution providers