Joe Doloboff, former Skadden Arps Slate Meagher & Flom deal jockey, now hangs his hat with Ernst & Young in downtown Los Angeles, which he says has created a “miniature law firm” within the CPA giant to help handle mergers. But last week Doloboff was loafing and not shy about it.

“The deal business is slow right now. I have scheduled a lot of vacation time for this summer,” he said.

But Doloboff said the lollygagging is only smart. It will be “showtime” come fall. Why? “There is too much money on the sidelines. The private equity funds are not in business to sit in short-term cash. They want to make some acquisitions.”

Indeed, former grocery store titan Ron Burkle’s outfit, Yucaipa Equity Partners, is putting together a $1 billion war chest for acquisitions, said Doloboff.

Come fall, when the economy sputters back to life, and sellers get restless to finally unload, look for 24/7 workweeks, predicts Doloboff.

The M & A; business is tepid these days, agreed Russ Cashdan, a partner with Kaye Scholer LLP in Century City. “No one wants to take a chance,” is how he describes buyer sentiments, what with the economy looking iffy. Solid businesses with good prospects can sell, but it is much tougher for “if, when, then and maybe” enterprises.

Don’t tell that to West Covina-based Southwest Water Co., traded on the Nasdaq National Market, which last week filed forms with the SEC to raise a net $15 million in a convertible bond offering. In business since 1954, Southwest Water in recent years has acquired other water companies, and plans to make more acquisitions, according to the filing. The micro-cap (it has about $100 million in annual sales and a market capitalization of $125 million) has been a steady performer on Wall Street for years, rising from $4 a share in the mid-1990s to $14.50 in trading last week.

Limping Leib

He may be limping (after breaking an ankle recently in his private tennis wars), but Leib Orlanksi, corporate transactions lawyer with Kirkpatrick & Lockhardt LLC in Beverly Hills, is still running a lot of deals and he says the always-restless venture capitalists are funding the right situations once again.

“Well, you remember the flood in the Bible,” asked Orlanski, who has visited the Mideast several times. “The dot-com meltdown was the modern equivalent. But now, we are getting indications of interest on many deals. It’s just like when a bird brought back a few blades of grass to Noah. The first signs of the end of the flood.”

Orlanski cites his client, Torrance-based Broadata Communications Inc., as an example of the kind of company moving ahead. Broadata makes hardware for use “in the last mile” of fiber-optic cable communications. While the nation has an abundance of long-distance fiber-optic cable, the difficulty of late has been in connecting the big light highways with medium-sized businesses on local networks.

Broadata has hardware that allows businesses to easily access data, graphic and voice communications over cable, and at a good price, said Orlanski. Broadata has retained John Morris, investment banker in the West Los Angeles offices of Gerard, Klauer & Mattison LLC, to put together a private placement of $12 million to $15 million.

Said Broadata Chief Executive Bert Walker, “It looks like we will be able to raise the money.”

Orlanski said, “If a company has a real product, and can show real motion to profit, now the VCs (venture capitalists) are coming forward again.”

Analyst Update

While a federal court of appeals negated a lower court break-up order for the software giant, a Securities and Exchange Commission release was probably more important for everyday investors, and in its bureaucratic way, just as interesting.

Acting SEC Chairwoman Laura Unger stated in a press release attached to the investor alert, “(Brokerage) analysts have been the focus of intense public scrutiny in recent months, and I am hopeful the industry will eliminate the conflicts of interest that threaten the fairness and objectivity of analyst recommendations.”

It was the first statement by a high-ranking SEC official that didn’t just ponder the problem of conflicted brokerage analysts as former SEC Chief Arthur Levitt did many times but actually went a step further to strongly suggest reforms are in order.

Of course, Unger was referring to analysts who work hand-in-hand with their investment banking departments to help promote stock offerings and other deals to the investing public. The deals may be lucrative for the brokerage indeed, banking is the main source of industry profits today for the bulge-bracket firms but lousy for retail investors.

What sparked talk in brokerage circles, however, was Unger’s use of the rather draconian word “eliminate,” certainly much stronger language than what the Securities Industries Association proposed on June 12 for handling analyst bias. Indeed, the SIA guidelines even countenance analysts being paid from investment banking departments and only recommend such payments be made “indirectly.”

That’s a long way from Unger’s desire that the industry “eliminate” conflicts. It is hard to reconcile the word “eliminate” with payment schemes that give money to analysts who goose the right stocks.

Was Unger chalking a line on the macadam of Wall Street?

Well, not exactly, said John Nester, an SEC spokesman. But don’t look for the SEC to roll over either. True, the SEC’s Unger recently directed her Office of Compliance Inspections and Examinations to examine the issue of analyst bias, with an eye on rule making, if the issue so warrants, said Nester. But Unger expects the industry first to propose more serious rules on its own, which would then be enforced by “the exchanges,” meaning the New York Stock Exchange and the National Association of Securities Dealers, said Nester.

“The SROs (self-regulatory organizations) would handle it,” said Nester, adding that only if the SROs failed to solve the problem would the SEC likely step in.

Still, Nester said the SEC views analyst bias as a festering problem. The SEC’s Office of Education and Assistance has received a growing volume of investor complaints about cruddy analysts, and the U.S. Senate and House have slated further hearings on the topic.

It appears that the industry and the SEC want to get out front on this issue, before some heady legislators build up too much steam.

Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. His new book is “The Pied Pipers of Wall Street: How Analysts Sell You Down the River,” published by Bloomberg Press. He can be reached at [email protected].