OOH …Here’s One Thing (to inspire young professionals in outdoor advertising and finance sectors to value their early career days)
MIDNIGHT CONFESSIONS
by Jim Johnsen,
Managing Director, Johnsen, Fretty & Company
https://youtu.be/w369aBf5SF4?si=w2MIujIuwG7ZHT9r
So I was listening to Tim Ferriss’s Jawbone with Ben Patrick the other day about how he went from a completely busted high school basketball player to someone who can now dunk with abandon. If you haven’t heard about Ben Patrick, you may have heard of the “Knees Over Toes Guy. If your knees scream from time to time, as mine do, it’s worth checking this guy out on YouTube.
Okay, Johnsen, you are always out of left field, but what’s the outdoor angle this time? Stay with me.
At the end of the interview, Tim Ferriss asks Ben Patrick, who, by the way, is building a very cool business around his YouTube fame, if there is anything else Ben would like to ask him. Ben, without missing a beat, says, “Tim, with all your fame and all your influence, how have you been able to stay on the right side of the fence? I mean, all you need to do is invest in an early-stage company, endorse it on your show, and it’s a self-fulfilling prophecy. Tim’s answer was pretty detailed and pretty genuine. If it’s all bullshit, I will never know, but I will give him the benefit of the doubt. But it got me thinking about the arc of my career and staying on the right side of the fence. And for the most part, I believe I have, but on the eve of a very special holiday and with age staring me in the face, I thought I would hang a confession out there that I am not proud of (and that is an understatement).
Somewhere in the mid-to-late 90s, we did a series of financings for Tri-State Outdoor Media (before they did a public bond offering). EBITDA was sacrosanct, and BCF hadn’t crossed anyone’s lips yet. Someone at Tri-State had figured out how to “jerry rig” EBITDA by capitalizing all production expenses and then amortizing them over the life of the advertising contract. Tri-State only sold 3-year contracts, so all production was amortized over 3 years, but… it NEVER hit EBITDA because it was a below-the-line expense. When you are looking to value yourself off EBITDA and borrow against EBITDA, and this EBITDA is…ehem…artificially inflated, let’s say it can lead to some wacky outcomes. All the same, the auditors didn’t question it, the lenders didn’t question it, and the private equity guys didn’t study it.
Enter Outdoor Communications (otherwise known as OCI), stage door left. John Stanley, AB Isbell, and their team were on a tear. And we were happy to help them. So when they proposed buying Tri-State, they of course engaged us to help them buy it. Tri-State would have been a good fit for OCI, giving them additional market share in their existing footprint and much greater reach in the Midwest.
We certainly wanted the deal to go through as the success fee was meaningful. I had a close relationship with Sheldon Hurst, Tri-State’s majority owner. I loved and respected John Stanley about as much as anyone I have ever met in the business. What’s one to do here? Other than many nights staring at the ceiling, I made the wrong decision. I kept my mouth shut. And then I shut it some more. Did I drop a subtle hint from time to time? Perhaps. But that was like a fart in the breeze. When John Stanley, his private equity firm, Great Hill Partners, and the rest of his team discovered shuk-and-jive accounting in the fourth quarter, the jig was up. The deal never happened. OCI was sold shortly thereafter to Lamar, Tri-State went into bankruptcy, and I lost a relationship that I really, truly valued.
In any event, that’s my midnight confession. Not sure I feel any better than I got that off my chest, but hey, at least I didn’t take it to the grave either.
On a much more joyful note, Happy and Healthy Christmas, and I look forward to seeing you in 2026!
“There’s a little gold ring you wear on your hand, Makes me understandThere’s another before me, you’ll never be mineI’m wastin’ my time.” The Grass Roots
Securities transacted through StillPoint Capital Member firm FINRA/SiPC
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