Reservoir wants to spend $100m on music rights this year. It says deal flow – and multiples – aren’t slowing down just yet.

Reservoir Media spent $224 million on acquisitions of music rights in its previous financial year (to end of March 2022).

The US-based firm is now aiming to spend another $100 million on “strategic M&A” this FY – and says wider macroeconomic concerns aren’t hampering its goal.

In calendar Q3, Reservoir acquired assets – for undisclosed sums – including the publishing portfolio of swing icon Louis Prima, plus Lebanese label and music publisher, Voice of Beirut (alongside PopArabia).

As reported by MBW last week, Reservoir generated $33.3 million in its fiscal Q2 (calendar Q3) up 10% YoY.

The company now expects its FY revenues in its current fiscal year (to end of March 2023) to land between $118 million and $122 million, with an adjusted annual EBITDA of between $45 million and $47 million.

Speaking to analysts on an earnings call following the publication of these numbers last week, Reservoir founder and CEO, Golnar Khosrowshahi said that her company was “pleased by the quality and volume of deals we executed in the past few months as we continue to make progress against our capital deployment goal of $100 million for strategic M&A in fiscal year 2023″

Khosrowshahi said that, in terms of this mission, Reservoir is “highly encouraged by our nearly $2.1 billion pipeline of prospective deals at various stages of development”.

She added: “Many of our transactions come to us through existing relationships and because of our reputation in the industry as thoughtful stewards of our catalog and the artists we represent. This inside track gives us better access to catalogs that may not be more broadly offered to other music companies.”

Analyst Richard Baldry of Roth Capital then asked Khosrowshahi if current macroeconomic factors, including interest rate rises, were lessening the number of M&A deals becoming available in music –  presumably due to buyers being unwilling to pay the multiples they might have been in a lower-interest-rate environment.

Said Khosrowshahi: “[We] just don’t have enough information yet to see any significant changes in the pipeline that would be anything more than anecdotal. The volume is still there.

“Given the interest in high-quality assets, there are still plenty of buyers, so we haven’t seen any kind of significant contraction on multiples that are related to macroeconomic factors that one [might] expect.”

Golnar Khosrowshahi, Reservoir Media

“Given the interest in high-quality assets, there are still plenty of buyers, so we haven’t seen any kind of significant contraction on multiples that are related to macroeconomic factors that one [might] expect.

“I think over time, this will change, but it’s just that we don’t have enough evidence [today] beyond what is anecdotal.”

Continued Khosrowshahi: “I will say deal flow is robust; it is a mixture of publishing assets and recorded [music] assets, and that mixture is pretty consistent. But I wouldn’t be able to point to an influx of sellers, nor [to] any kind of significant change in demand and price contraction.”

Khosrowshahi was later asked on the analyst call what impact a recession might have on Reservoir’s business in future – and if she expected sync income from advertising to feel the biggest impact.

“That’s exactly what we’re looking out for,” she said. “As you [consider] the macro environment and the impact that it has on business in general, [advertising sync] is an area that one would [expect to] see contraction with advertising budgets diminishing. We are really keeping an eye on that.”

She added: “Obviously, volume of sync helps offset [a reduction in ad sync dollars] a little bit as far as licensing goes, and maybe we’re doing more micro-licensing than large-ticket advertising licensing.

“The good thing about the sync side of the business is that as production has come back, there’s quite a lot of demand on the film content side… but this is certainly not new territory for us to navigate, and we are quite accustomed to the sync side of the business being cyclical and one that we are prepared to go through.”

Based in New York City and with offices in Los Angeles, Nashville, Toronto, London, and Abu Dhabi, Reservoir has grown to represent over 140,000 copyrights and 36,000 master recordings.Music Business Worldwide