THE ALLURE OF OUTDOOR: An acquisition boom points to increasing interest in the sector from media owners on the buy. Andy Fry reports

In the last three years, the UK outdoor advertising industry has been the subject of no less than 20 separate acquisitions. The biggest of them came last year with the pounds 475 million purchase of More Group by the US radio broadcasting giant, Clear Channel.

In the last three years, the UK outdoor advertising industry has

been the subject of no less than 20 separate acquisitions. The biggest

of them came last year with the pounds 475 million purchase of More

Group by the US radio broadcasting giant, Clear Channel.



However, the imminent pounds 300 million sale of the Havas Group’s

international outdoor empire, which includes its UK subsidiary, Mills &

Allen, has ensured that the outdoor brigade remains a priority for

would-be media investors.



One of the most significant aspects of the current wave of activity in

outdoor is the interest shown by broadcasters. Aside from the Clear

Channel deal, Scottish Media Group has just forked out pounds 35 million

for the poster specialist, Primesight.



More recent still is Scottish Radio’s pounds 27 million acquisition of

Trainer - one of the premier outdoor contractors north of the border.

Among the names touted as potential buyers of the Havas business are

Carlton Communications and Granada Media Group.



Keep on digging and you discover that broadcasters had made their mark

even before the latest round of purchases. TDI, one of the most dynamic

arrivals in the UK, is owned by Westinghouse - making it part of the

same corporate family as the US network, CBS. Go back far enough and you

discover that Clive Hollick’s MAI was a former owner of the Havas poster

business.



Mills & Allen’s marketing director, David Pugh, cites a number of

reasons for the renewed interest in the sector. ’As other media

fragment, outdoor is playing an increasingly important role as the

broadcast glue that can hold a mixed media campaign together,’ he says.

’Not only that, but better research, bigger audiences and increased

professionalism are driving growth.’



According to Pugh, investors are not only attracted by the industry’s

growth so far. ’This is still an underperforming medium,’ he claims. ’It

currently takes 5 per cent of national ad revenue and we believe it can

go as high as 8 per cent.’



Eric Newnham, chief executive of the outdoor specialist, Poster

Publicity, believes that the financial markets are also driving demand.

’There has been massive consolidation in the US outdoor business which

explains why some big North American players are looking for

opportunities internationally,’ he says. ’There is also pressure on

public companies here to find ways to grow. It is no surprise that media

companies are turning to the last untapped broadcast medium.’



This sentiment is echoed by the prices at which outdoor is trading. The

price paid by Scottish Radio for Trainer is, by some estimates, eight

times the established market rate. Meanwhile, Maiden, one of the last

major independent groups, has seen its share price double recently -

despite issuing a profit warning last year.



Observers believe there are good reasons why Carlton or Granada might

see Mills & Allen as a good fit with their existing business. Nigel

Mansell, managing director of the outdoor specialist, Concord, says:

’Granada is already employing agencies to put up poster sites in its

motorway service stations and Little Chefs - so there is a natural fit

there. Meanwhile, Carlton is a heavy user of outdoor to promote its TV

programmes. That means potential savings of millions for them in such a

deal.’



Not all companies have the same corporate agenda, however. Scottish

Media Group’s acquisition of Primesight gives a useful insight into the

way British television broadcasters view outdoor.



SMG’s corporate affairs director, Callum Spreng, says: ’We’ve got a

robust media business as a result of ITV and our newspapers - but it is

not growing as fast as outdoor. So we see good growth potential to tap

into. Primesight has gone through significant growth in the six-sheet

market and we will accelerate that trend during 1999.’



Spreng also underlines the point that ’outdoor is seen as a good support

medium by TV advertisers’. This observation raises the spectre of

cross-selling between the two media - though Spreng is adamant this is

not SMG’s intention. ’The plan is for Primesight to be a stand-alone

business,’ he says.



The story of Clear Channel’s arrival in the UK is a quite different

affair. After acquiring More Group, it has now returned to its roots by

snapping up Golden Rose Communications, the radio group which owns Jazz

FM.



Clear Channel International’s chief operating officer, Coline

McConville, identifies a number of strategic strands within the

company’s UK expansion.



While the More Group is a robust and growing business in its own right,

McConville says the acquisition is also a way for CCI to strengthen its

position in the US outdoor market. ’We’ve been part of the consolidation

in the US, but the outdoor market there is still only 2 per cent of

total ad revenue. The European experience shows that getting up to 5 to

6 per cent requires a growth in the use of street furniture. That is

what gets advertisers’ message into the heart of cities.’



At the moment, street furniture is virtually non-existent in the US.



But McConville believes that ’by investing in and innovating around the

More business, we can build up the medium’s credibility and demonstrate

the benefits of street furniture to the US market’.



Although CCI’s core business in the US is radio, the Golden Rose

acquisition is opportunistic rather than a strategic attack on UK radio.

By fusing the two businesses, CCI can reduce Golden Rose’s costs,

McConville says.



Already sales, marketing and PR have been brought together under one

roof.



As in the Carlton/Havas scenario, there is also a potential saving of

millions for Jazz FM in terms of outdoor promotions.



With all eyes now on Havas, the most likely scenario is that CCI or TDI

will acquire the lot - then sell the M&A business in order to head off a

confrontation with the UK competition authorities. Most agree that

Carlton and Granada would be unwise and unwilling to take on all of

Havas’s European portfolio.



As for the prospective benefits of new owners in outdoor, the views of

insiders are mixed. Pugh says: ’It is attractive to see new shareholders

bringing money and expertise into the market.’



Newnham agrees - though he has some reservations. ’There is potential

for growth in outdoor but it will take a lot of investment and hard work

bringing in new advertisers.’



Mature media owners such as Carlton or Granada ’may bring more

credibility to the medium,’ Newnham continues, ’but they will also be on

a steep learning curve. They will need to work with experienced

professionals if they are to get the best out of the medium.’



Concord’s Mansell agrees with this assessment - and expects it to be a

key form of protection for poster buying specialists. ’We have a lot of

experience in advising clients on strategy and then implementing it. I

see no fundamental threat to that role.’



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