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Station Group Marriages: Bliss Or Miss - Broadcasting & Cable

Station Group Marriages: Bliss Or Miss

The spate of local TV mergers and acquisitions has created some partnerships made in heaven—and some not so much
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While their areas of expertise may be local news or sales, the folks who run station groups have suddenly become experts in culture as well. Amid the $8 billion worth of TV stations changing hands in 2013, much of it in the latter half of the year, the acquiring chief executives frequently cited culture— namely, that the group they were acquiring was an ideal match in terms of core values—as a key facet of the deal.

Gracia Martore, president and CEO of Gannett, spoke of the “shared values” and “shared cultural focus” between Gannett and its $2.2 billion Belo acquisition. Dave Lougee, Gannett Broadcasting president, voices a similar sentiment when he mentions what he describes as near mirror-image profiles for the two local broadcast giants’ portfolios: legacy stations in major markets, staunch commitment to local news and consistent ownership and management over many years. Marrying like-minded cultures, he believes, makes the expanded Gannett, now reaching over one-third of U.S. households, a whole lot stronger—and his job a wee bit easier.

“The 30,000-foot view is, there is no difficulty in merging the cultures— we should hit the ground running and take on the strategic charge together,” Lougee says.

That, of course, is in a perfect world. As Lougee acknowledges, not everybody is so fortunate, either on paper or in practice. The billions of M&A also includes some new partnerships between companies that would probably prefer a 30,000-foot view away from each other.

“If it’s a different profile of stations,” Lougee says, “it’s a much harder job to integrate.”

Gannett’s execs are hardly the only corporate types talking up the importance of culture these days. Nearly 300 TV stations changed hands last year, according to BIA/Kelsey, meaning a giant swath of the local television workforce is either getting new management, or getting to know a new batch of coworkers. Media General’s merger with Young Broadcasting was envisioned as a “perfect marriage” by George Mahoney, president and CEO of Media General, pairing “two companies with similar cultures and values.” When Tribune announced its $2.73 billion acquisition of Local TV, Bobby Lawrence—then CEO of Local TV—spoke of how “our cultures and operating philosophies are very similar.” Upon Gray Television’s acquisition of Hoak Media, Hilton Howell, Gray president and CEO, cited “how well the stations’ locations, operations and culture complement our own.”

Other acquisition announcements, from the likes of hyper-acquisitive Nexstar and Sinclair, focus more on scale and synergies. While an acquisition has to first and foremost work on the financial end, it’s clear that, in the age of massive station consolidation, like-minded cultures in local TV matter a great deal. “With so much movement, it’s hard for every match to be perfect from a managerial or personality standpoint,” says John Altenbern, president of consulting firm CJ&N. “But I think it’s a huge deal, and has a lot to do with future success.”

Altenbern mentions the correlation between management changes and station performance, and veterans of corporate takeovers in local TV say even the smooth transitions are jarring. According to one seasoned GM who asked to not be named, it’s a two-year process from when a company announces it is exploring the dreaded “strategic alternatives,” to when the deal goes down, and Company B is fully assimilated into Company A. “It immediately becomes a distraction: Will I have a job? What about the general manager?” he says. “It’s extremely disruptive and stressful— it can really be a gut-wrenching time.”

Look Out Belo!

Much of the corporate speak about cultural matches is just that—carefully crafted talking points. Most industry watchers agree with Gannett leadership that it and Belo match up handsomely; “there’s a little get-to-know-you, but the cultures will blend pretty easily,” says Bill Hague, senior VP at Frank N. Magid Associates. But others see the matchup as less optimal. Belo enjoyed life as a well capitalized pure-play broadcast company ever since the Belo newspapers were spun off as a separate, publicly traded company in 2008. Some believe the stations are in for some cost-cutting now that they’ve got Gannett’s giant newspaper division in the corporate portfolio. (Gannett has mentioned attaining nearly $175 million in yearly synergies within three years, and Lougee says most of that is on the revenue side, not in expense-cutting.)

One GM who competes against a Gannett station calls it a “huge culture shock” for the former Belo employees, suggesting “it would be a match of cultures if this was 20 years ago.”

Several insiders also see Media General and Young Broadcasting as an odd fit, Media General viewed as a top-down company with a strong corporate presence, and Young with considerable autonomy at the local level. Young alums say the transition has thus far been smooth, and give Mahoney high marks for visiting each acquired station to meet with the new employees. “That went a long way,” says one exec. “He answered every question, hard or soft.”

Mahoney, who tapped former Young president/CEO Deb McDermott to oversee the merged group, says the Young stations, which included KRON San Francisco and WKRN Nashville, will enhance their investigative reporting and digital strategies as part of Media General. Groupwide meetings for department heads will make sure Young’s best practices bubble up as well. “I’m delighted with where we are,” Mahoney says.

Longtime Trib Sib

The largest deal of 2013, between Tribune and Local TV, is unique in that the two had paired up in 2007 to form a broadcast management company— cheekily titled The Other Company during Tribune’s wackier era—that shares tasks such as administration and syndication acquisitions. Such familiarity made Tribune a favorite in the Local TV auction. “The challenge [of assimilating] is facilitated by the fact that we already worked together,” says Larry Wert, Tribune Broadcast Media president. “We’ve got successful duopolies in St. Louis and Denver, and have synchronized operations in all markets. It’s helped us get to know each other quicker.”

Wert quips that the combined group—a mix of market leaders and also-rans of all affiliate stripes, ranging from DMA No. 1 to 101—is the “Land of Misfit Toys.” The lack of an entrenched corporate profile on both sides—Tribune turned over management after a fouryear stint in bankruptcy, while Local TV was hatched in 2006 and for sale not that long after—should make for a more fluid blending. “The cultural mentality for both was different than it is now,” says Wert.

Then There’s Sinclair

Of course, no discussion of station group acquisition is complete without mention of Sinclair, which closed on deals for Barrington ($370 million), Fisher ($373 million) and Titan ($115 million), among others, in 2013, and awaits a sign-off on its $985 million Allbritton purchase. Including pending transactions, the group owns or provides services to 167 stations in 77 markets. Talk of scale, new territories and group synergies is much more common in the Sinclair acquisition announcements than cultural introspection.

Several privately say Sinclair makes for an odd match with its acquired properties. One veteran Barrington exec mentions “culture shock” at the acquired stations as they start getting marching orders from Sinclair headquarters in Baltimore. “Our localism is first and foremost—serving the local community with news and information,” says the broadcast vet. “I’m not sure what Sinclair’s model is in that regard.”

While Barrington general managers held a president/ CEO title in their market, a value unique to Barrington, general managers are more stewards of the station’s sales operation now, say multiple sources. (Sinclair is one of the few groups whose general managers are not, for the most part, VPs or presidents.) “It’s very difficult to make decisions from 100 miles away,” says the Barrington exec. “Or 1,000 miles away.”

It’s closer to 3,000 miles away for the Fisher stations, clustered in the Pacific Northwest. “I can’t think of two more disparate cultures,” says a former Fisher exec who asked to not be named. Must-run content coming from corporate, the exec adds, does not go over well in Fisher’s more liberal markets.

Former Fisher staffers mention Sinclair brass greeting them with a sobering sales-centric, My-Way-Or-the- Highway address at the stations. “It was, this is how it’s going to be—you’re in or you’re out,” says Steve Mansker, a KATU Portland satellite truck operator who was laid off. Other attendees of the Portland meeting privately mention a more balanced presentation from Sinclair. Sinclair did not respond to calls for comment.

Yet others credit Sinclair for modernizing an operation that may have needed TLC. Jeff Miller, general manager at KPTM Omaha, says Sinclair’s acquisition of the station has meant superior employee benefits and more stability. “Overall, it’s been a positive impact,” he says. “Under Titan, we were well managed but the investment was not there. That has kicked in with Sinclair, and it’s really going to shine through.”

Buyer’s Bonus

In many cases, the acquiring group may benefit not only from the scale of an acquisition, but—perhaps paradoxically— from some cultural aspects of the group it has gobbled up as well. Lougee says Gannett will borrow best practices from Belo’s forward-thinking digital operation. The Tribune group, featuring many more middling stations than market leaders, can tap Local TV—born from New York Times Co. and Fox Television Stations acquisitions—for tips on executing standout local news. “If they’re wise, it’s a great opportunity for Tribune to say, hey, they do things right,” says a former Local TV GM, “rather than, here’s our giant footprint.”

Tribune also seeks to glean from Belo’s winning ways as well. It tapped Kathy Clements, former Belo senior VP, to be co-COO.

If 2013 was the year of station M&A, 2014 is the year where hundreds of stations, and tens thousands of staffers, get acclimated to the new local TV landscape. One benefit of acquiring a like-minded group is that most of the local-level leadership stays in place, greatly easing the transition for all. For its part, Gannett hired Peter Diaz, the respected Belo president of media operations, for one of two executive VP roles in the new group.

Dave Lougee—himself a former Belo executive VP— is hoping some of that market-leading Belo magic will rub off on the Gannett stations. “Culture matters,” says Lougee. “The better the cultural fit, the better the outcome of the merger. That’s been proven out in our industry time and time again.”

RELATED: Breaking Barriers, Breaking Records

While their areas of expertise may be local news or sales, the folks who run station groups have suddenly become experts in culture as well. Amid the $8 billion worth of TV stations changing hands in 2013, much of it in the latter half of the year, the acquiring chief executives frequently cited culture— namely, that the group they were acquiring was an ideal match in terms of core values—as a key facet of the deal.

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