Like the scarecrow in “The Wizard of Oz,” L.A.’s investment bankers are pointing in two directions at once, saying that each path will lead to success.
Some firms have been laying off staff in one group, while simultaneously hiring in other areas. That’s partly due to shifts in the marketplace health care is healthy, for example, but telecom needs a lifeline.
With all the major banking firms headquartered elsewhere, L.A. offices are exceedingly vulnerable to the whims of their corporate parents, and recently, those parents have been retrenching.
“It’s fair to say that the regional offices of New York-based or Europe-based financial institutions have not been in charge of their own destinies,” said Ron Silverman, managing partner in Gerard Klauer Mattison & Co.
New York-based GKM’s Los Angeles office wields growing internal clout. Since the office was founded in late 1999, GKM has hired about 30 investment professionals, including bankers, analysts, venture capitalists and a growing group of media-and-entertainment consultants.
The media-and-entertainment practice, launched last November and led by David Merritt, former chief financial officer of Artists Management Group, is expected to drive additional local hiring, Silverman said.
On the other hand, the local operations owned by Tucker Anthony Sutro Corp. couldn’t be more unsettled. Four months after announcing the merger of its independent brokerage units, Sutro & Co. and Tucker Anthony, Tucker Anthony Sutro agreed to be purchased by Royal Bank of Canada in August. L.A.’s Sutro presence, including investment banking, institutional sales-and-trading and retail operations, was still being integrated with Tucker Anthony when the RBC merger was announced. Now, after yet another review, the operation will be folded into RBC’s Dain Rauscher Inc. unit and run from Minneapolis.
More cuts to come
Sutro’s Los Angeles forces absorbed a higher proportion of the integration-related cuts that took place earlier this year. About half a dozen investment bankers were lost, around 30 percent to 40 percent of the local banking staff.
“The remaining people are part of a much stronger organization,” said Michael Glazer, a vice president with Tucker Anthony Sutro Capital Markets.
The current structure, however, is almost certain to be short-lived, as Dain Rauscher’s own staff has been focused heavily on technology and initial public offerings, areas that have cooled considerably in the past year. Also, RBC has made it clear that it’s most attracted in Tucker Anthony Sutro’s retail operation. “I don’t know what they’re going to do with the other areas,” said Marie Ogurick, an analyst with Sidoti & Co.
RBC estimates restructuring charges of $60 million, after taxes a sure sign of further cuts. Sutro has about 200 retail brokers on the West Coast and a substantial number of those are in Southern California offices. It also has an institutional sales-and-trading desk downtown, with about 20 people. Sutro’s analyst ranks have already been thinned, including the loss of its entertainment and REIT analysts earlier this year.
Profitable sectors
Meanwhile, a number of Wall Street firms have announced job cuts this year, though the local impact defies generalization. Bear Stearns recently let go five investment professionals out of 42 in its local office, but it also hired 10 new staff members.
Bear Stearns is active in the media and entertainment area, telecom, technology, healthcare and financial services. Its hiring and firing wasn’t focused on any area, said company spokesman Russell Sherman. He had no comment on rumors that additional cuts are on the way.
Credit Suisse First Boston, which lost two dozen bankers last year to rival UBS Warburg, is holding steady with more than 100 in its group. “It’s a choppy environment but our business is actually stronger this year than it was last year,” said Michael Hooks, managing director.
Credit Suisse, with the largest local presence among investment banks, has retail, telecom, gaming and lodging groups in L.A. While telecom business has fallen off from last year, healthcare is still busy, Hooks said, and strength in high-yield lending and restructuring have more than made up the difference.
If there’s one trend that bankers can point to confidently, it’s a shift in deal type. In this ailing economy, restructuring and mergers-and-acquisitions are on the upswing, underwriting and other capital-raising activities are depressed.
