Columns & Features – High-Profile Lawyer to Run Local Branch of Brokerage

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New York-based institutional brokerage Gerard Klauer Mattison & Co. Inc. is coming to town and has hired Ron Silverman, nameplate partner at Beverly Hills-based entertainment-media law firm Weissman Wolf Bergman Coleman & Silverman, to head up the new office.

It’s another sign of the “brain drain” afflicting local law firms, as the Internet and securities firms, loaded with dough and hungry for bodies, entice young associates and senior partners alike into new careers.

Silverman, 53, is hitting the ground running for Gerard, hiring Jonathan Bloch, an investment banker formerly with Chanin Capital Partners, and Internet research analyst David Takata, formerly with Gruntal & Co., to help warm new warrens in the Westwood Gateway office complex in Santa Monica. More hirings are imminent, says Silverman.

On the boards are plans to start a venture fund with $50 million to $100 million in the pot, said Silverman. Like other brokerages, Gerard Klauer has found that venture capital is an excellent entree to companies en route to an initial public offering and Los Angeles has become a venture capital Mecca, especially where “content meets the broadband,” said Silverman.

That means Hollywood can provide stories and images for content-hungry Web sites of the future, when rapid downloads become the norm.

“Gerard has offices in New York, San Francisco, Chicago and Tel Aviv,” Silverman said. “Los Angeles was the obvious omission. But no more.”

But a lawyer as venture capitalist? Lawyers are often risk-averse, perhaps the opposite mentality of venture capitalists, who place a lot of bets many of which will return zilch hoping for a jackpot payoff. Can Silverman switch gears?

“Well, this transformation will be and is very exciting for me,” said Silverman, long active in media transactions. “The risk is the reward. My compensation is more incentive-driven. You do as well as your merits dictate.”

With law firms crying about a labor shortage and paying first-year law grads $125,000 a year plus bonuses, what advice does Silverman offer the legal industry as he hits the exits?

“Law firms will have to start offering equity kickers (in client companies) in addition to straight pay,” said Silverman. “They will have to become much more entrepreneurial, and they will have to accelerate the partnership track for the right young stars.”

Telling young tyros that if they work hard for eight years they might make partner in the firm “probably won’t work anymore,” said Silverman.

Net Merger

The analyst community evidently liked the recent merger between Santa Monica-based U.S. Interactive Inc., the publicly traded Web-site development and marketing company, and Cupertino-based SoftPlus Inc., a private firm that provides technical support to companies starting Web sites.

U.S. Interactive has agreed to swap stock, pay $20 million in cash and promise a one-year $80 million IOU for SoftPlus, and is calling the deal a “$358 million acquisition.”

San Francisco-based Hambrecht & Quist, in comments typical of most, maintained its “buy” recommendation on U.S. Interactive, and predicted that the merged company would actually go to black ink in this year’s third quarter which would make it one of the few Internet companies to make money.

By acquiring SoftPlus, U.S. Interactive will retain in-house many of the technical services it formerly hired in its business of creating full-service Web sites and e-strategies for large companies. Additionally, U.S. Interactive picks up offices in Paris, Munich, London and India run by SoftPlus an international presence in an industry that almost defies borders. U.S. Interactive serves what it calls the “Global 2000” the largest companies worldwide and already has such clients as Microsoft, Intel and Lucent Technologies.

One side-feature of the pending merger: SoftPlus, which had been talking with Goldman Sachs & Co., will forego its own IPO, and the chance for the “big pop” the 500 percent or so explosion in price that often enriches insiders and institutional shareholders alike on day one of trading.

Cynics will wonder why SoftPlus shareholders would leave that potential financial windfall on the table. But Mike Carter, chief marketing officer at U.S. Interactive, said that employees and shareholders of both SoftPlus and U.S. Interactive believe the two companies together “could be first in this space (of creating full-service Web sites for major corporations) in eight to 12 months.”

Bankruptcies Boom

What is the fastest growing group at Houlihan Lokey Howard & Zukin, the Century City-based corporate evaluation firm? “Our bankruptcy practice,” said Jim Zukin, founder and nameplate partner. “What people don’t realize is that as part of these boom-times, credit quality in high-yield financing has gone down.”

With lenders loosening their standards, “last year there were more defaults in high-yield bonds than at any time since the beginning of the junk-bond wave in the early 1980s,” said Zukin. As a result, HLHZ financial gumshoes are increasingly called in by creditors to figure out what the carcass is worth, and help devise strategies to maximize returns.

But lest anyone think HLHZ isn’t Web-hip, Zukin quickly adds, “We now have more than 100 Internet clients, and our mergers business is increasing rapidly in that field. The business is consolidating.”

Larger public Internet companies are buying smaller private ones, said Zukin. Again, that requires the services of corporate evaluation gurus.

By the way, HLHZ, which only yesterday seemed like a vest-pocket business, now has more than 400 employees. Zukin said, “Our slowest growing departments are increasing business at 30 percent a year. Bankruptcy grew by 50 percent last year.”

Quick Takes

B. Riley & Co. Inc., the Westside boutique brokerage, is hosting 12 California companies for an investor forum on Feb. 24, including local shoemaker Vans Inc., real estate auctioneer Kennedy Wilson Inc., and Veterinary Centers of America Inc.

John Kelly, senior vice president at proxy solicitation firm MacKenzie Partners Inc. in Century City, says a tougher task in today’s trade-happy world is to get shareholders to respond to solicitations. “Who is the shareholder of record? Some day trader who owned the stock for five minutes on a Tuesday?” he asked. “They don’t want to be bothered with a solicitation.”

Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at [email protected].

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