Mike Brown, a veteran investment banker who carries many scars and pelts from takeover battles and corporate financings, announced last week that he has left Sutro & Co. to hang his hat at regional brokerage Wells Fargo Van Kasper (formerly First Security Van Kasper) in Westwood.
Brown, once known as Mike “Out of Town” Brown at Goldman Sachs & Co., has a storied past in L.A. financial circles.
He worked at Drexel Burnham Lambert in the glory days, and in fact led the 1984 charge for takeover artist T. Boone Pickens’ run at Unocal Corp., which was then based in downtown Los Angeles.
Fred Hartley was chairman and CEO of the oil giant back then.
“I guess if we had to pick a fight, Fred Hartley was the wrong guy to pick it with,” Brown recalls today.
Hartley threatened to load up Unocal with corporate IOUs called a “debt bomb” should T. Boone move forward with a tender offer for Unocal shares. Boone and Brown retreated, though it will remain ever dubious whether Hartley had actually served the interests of Unocal shareholders in the whole fandango.
In any event, when Drexel Burnham collapsed 10 years ago, Brown alighted anew at Sutro & Co., handling merger work and general investment banking duties. At his new home inside giant financial conglomerate Wells Fargo, Brown is eyeing the bank’s huge client list for prospects.
“I have been told that Well Fargo has 12,000 small or middle-market corporate clients,” said Brown, who has the title of managing director. “Obviously, only a minute fraction of those have to be bankable for us to be swamped.”
Two weeks ago, Wells Fargo completed its acquisition of First Security, the bank holding company that previously owned San Francisco-based Van Kasper.
Van Kasper has 11 investment bankers in L.A. and a total of 35 systemwide, all in the West. It also has 25 analysts throughout the company, and Brown believes that’s a key to penetrating the middle market.
“The mid-cap corporations know they need analyst coverage to get recognition on the Street,” he said. “It helps to get business if clients know they will also get coverage.”
Brown defines the middle market as transactions in the $25 million to $50 million range.
Last week, he was working on a $10 million “earlier-stage” private placement for a local high-tech data storage client. He had several venture capitalists and corporate strategic partners lined up for the financing yet another sign of how investment bankers such as Brown have become much more flexible in recent years by moving earlier in the financing history of a company. “That’s part of what keeps the work interesting,” said Brown. “When you work with middle-market companies, you can work all facets M & A;, early-stage financing, or follow-on offerings. It’s not the same old, same old.”
Out of the Back Room
Frank Kline, founder of Westside-based Kline Hawkes & Co. venture capital outfit, recently returned from New York, where he was soliciting funds from the $111 billion New York State Common Retirement Fund, the big nest egg for that state’s public employee retirees.
Kline, who runs money for the California Public Employees Retirement System (the nation’s largest with $155 billion in assets), reports that New York and other Eastern states are moving toward California-type oversight on investment of retirement assets.
“I think because our funds are a little newer, they have been more accepting of using consultants, whereas in the East, the funds are older and used to doing things the old-fashioned way,” said Kline. “But they are catching up.”
In seasons past, some state pension funds have not been beyond manipulation for political reasons. Witness the state of Kansas’ retirement fund, which dubiously invested in a plethora of Kansas-based businesses in the late 1980s, many of which went bust, a matter that provoked official investigations.
California, meanwhile, has managed to step to the forefront of states that use independent consultants Kline calls them “gatekeepers” who review money managers on behalf of state retirement fund boards. In general, government retirement investment board meetings in California are public (though sparsely attended), as are the reports of consultants.
In any event, if Kline’s observations about East Coast pension funds are correct that independent consultants, not cronyism, will help determine investments it marks yet another heartening, positive shift in fiduciary standards in America.
Only a generation ago, many corporations and retirement funds seemed to be run for the benefit of managers and buddies, not shareholders or retirees. Now, more corporate and retirement fund boards appear to be taking their responsibilities more seriously.
Quick Takes
Maybe it’s a flat year on Wall Street but investing is still something of a passion and pastime in West Los Angeles, where the demand for top stockbrokers and branch managers continues to escalate unabated.
Recently, the Beverly Hills retail branch of Prudential paid a 150 percent bonus to recruit stockbroker Robert Camras from Salomon Smith Barney’s office in the same city. That means Prudential will pay Camras a bonus of 150 percent of the commissions he earned in his last year with Salomon.
Word on the street was that Prudential was “paying back” Salomon Smith Barney for swiping one of its brokers earlier and “sending a signal” to all other brokerages to keep their hands off the talent…
Lorne Goldberg, founder of the 3-year-old Beverly Hills-based boutique investment and merchant banking shop West Coast Capital LLC, reports that he has closed “$70 million in transactions this year, and the year isn’t over yet.”
Goldberg is especially high on Los Angeles-based ClearView Networks Inc., a company with hardware and software to convert security cameras and other such equipment into cameras that can provide images to send via the Web. “Daycare centers will be huge (potential customers),” he said. “This will allow parents to log on, use a password, and check how their kids are doing.”
Factory owners, chain stores and others can use the cameras for surveillance as well, says Goldberg, who raised $3 million in a first round of venture financing for ClearView, and is gathering another $20 million for the second round.
Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at [email protected].
