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Boutiques Boost Staffs as M&A Activity Grows

After the financial crisis, which upended the economy and pushed the country deeper into a recession, the corporate finance markets ground to a halt this year.

And despite being some 3,000 miles from Wall Street, the robust community of mostly boutique investment banks in Los Angeles could not escape the upheaval.

But midway through the year, a measure of confidence returned to the markets. As a result, mergers and acquisition activity made a comeback, equity offerings resumed and L.A.’s investment bankers were able to get back to work.

What’s more, several local boutiques took the opportunity to expand, dipping into the deep, available talent pool left by Wall Street’s implosion.

“There’s no question that client activity picked up in the last half of the year,” said Edward Wedbush, president of Wedbush Morgan Securities Inc., an investment bank in downtown Los Angeles that added 300 employees this year. “There’s been a resurgent demand for all kinds of financing: IPOs, secondary offerings, private financing.”

In the summer, for instance, West L.A. investment bank B. Riley & Co. helped close the $175 million acquisition of liquidation specialist Great American Group in Woodland Hills by a special-purpose acquisition company – the first successful SPAC deal in Los Angeles in about a year and a half.

Restructuring activity, too, has been strong.

Houlihan Lokey Howard & Zukin of Century City was hired in March to advise theme park chain Six Flags Inc. on its restructuring.

Shortly thereafter, Metro-Goldwyn-Mayer Inc. brought in Moelis & Co., a Century City investment bank founded in 2007, to refinance the film studio’s debt. More recently, Moelis got a high-profile gig advising Dubai World on its $26 billion debt-restructuring effort.

“The restructuring business has been very active,” said Navid Mahmoodzadegan, managing director and co-founder of Moelis. “It’s been a very important driver of growth.”

And with the big firms still trimming their ranks by the thousands, a number of local investment banks said they have had a once-in-a-lifetime opportunity to add top-shelf talent.

Wedbush Morgan has grown from about 700 employees to 1,000 in the past year, and has tentative plans to open at least two additional offices soon. Imperial Capital in Century City added two dozen people in 2009, while B. Riley hired 10.

For Moelis, the hiring came fast and furious. In May, the firm snagged Stuart Goldstein from Citigroup; Merrill Lynch veteran Kevin Scheetz joined the following month; a team from JPMorgan Chase moved to Moelis in September. In total, the boutique firm has grown nearly 90 percent this year to 270 employees, a spokeswoman said.

While several local firms have grown, at least one longtime L.A. investment bank quietly bowed out this year. In July, Barrington Associates, a boutique Brentwood firm founded in the early 1980s, was folded into Wells Fargo Securities, which acquired Barrington in 2006. As part of the recent move, which included getting rid of the Barrington name, Wells Fargo Securities laid off at least one-third of Barrington’s staff and closed its three satellite offices around the country.

In one of the year’s more head-turning announcements, Imperial Capital filed a prospectus in October to go public.

The firm hopes to raise $150 million through the offering, which will be used to increase its profile and expand its national footprint, as well as to attract capital and talent. Imperial Capital executives declined to comment, saying they were in a regulatory quiet period after the prospectus filing.

Like Imperial Capital, many local firms have begun positioning themselves for what many see as a likely rebound in 2010.

“It’s a pretty good outlook for 2010 on the investment banking side,” said Bryant Riley, founder and chairman of B. Riley. “There is still a lot of fear and hesitance on the part of investors, (but) you’re definitely seeing the markets open up. There’s a lot of cash out there and I think that’s going to open up the markets for public offerings.”

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