MERGERS—Corporate Giants Mining L.A. For Middle-Market Companies

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Local merger activity slowed further during the third quarter ended Sept. 30, but more corporate giants are becoming active buyers of L.A.-area companies, according to data analyzed for the Business Journal by Mergerstat LP, a Los Angeles-based research firm.

Giants like Hewlett Packard Co., Intel Corp. and Cisco Systems Inc. which until recently had generally ignored the $50 million-to-$100 million deals that characterize L.A. action are now lowering their sights.

“Where there is good technology and good people, the multibillion-dollar giants are going for smaller deals for amounts they used to consider rounding errors,” said David Barnes, a director at Houlihan Lokey Howard & Zukin, an L.A.-based investment bank and co-owner of Mergerstat.

Some locally based companies also were active buyers. The quarter’s biggest deal was Walt Disney Co.’s $3 billion acquisition of Fox Family Worldwid from News Corp. Ltd.

Other L.A. buyers were Avery Dennison Corp. and Jacobs Engineering Group Inc.

Overall, however, the volume of L.A. deals continued to plummet, reflecting a deepening of the slowdown that began in early 2000.

A total of 111 deals involving Los Angeles-area companies were announced in the third quarter, a 19.6 percent drop from the prior quarter, Mergerstat reported.

The 26 L.A. deals announced in the third quarter for which values were publicly disclosed had an aggregate value of $4.2 billion, translating to an average of $161.5 million per deal. That’s down from the $194 million average in the prior quarter, but remains high relative to the average deal values in recent years.

Not all third-quarter action was driven by big companies.

Acorn Technologies Inc., a fledgling Pacific Palisades outfit funded by investors like Peter Norton, bought Intellectual Capital Management Group of Palo Alto. That acquisition is aimed at helping Acorn acquire intellectual property from Fortune 500 corporations.

Acorn buys inventions from industry and academia, develops them and then sells off the licensing rights.

Industry sectors active in the quarter included technology, media and health care.

A few local investment firms that have remained active throughout the slowdown continued to announce new deals in the quarter. Those included Gores Tehnology Group, which bought the human resources information unit of Fiserv Inc., and Platinum Equity Holdings, which bought the access products division of ADC Telecommunications Inc.

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