It's no big secret that the mergers and acquisitions market is struggling. But it may even be worse than it appears.
According to a survey released this month by the Association for Corporate Growth and Thomson Reuters, 86 percent of M & A; professionals in California say the market is fair or poor the most negative outlook in the history of the survey.
"The negative sentiment is overwhelming," said Scott Kolbrenner, a director in the Los Angeles office of investment bank Houlihan Lokey, in a statement.
A year ago, 74 percent of those surveyed said the local deal environment was good or excellent.
Los Angeles, in particular, is seeing a pullback in the deal market amid the deepening recession. In November, just 57 deals were announced for a total of $620 million the lowest total since the Business Journal began tracking M & A; activity in July 2005.
The decline in the national M & A; market began in late 2007 as credit availability and pricing expectations declined, said Doug Schreier, a principal in the M & A; transaction services group at Deloitte in Los Angeles. But Los Angeles dodged the bullet initially because the area has few large transactions, which were the first to see a pullback. "The Los Angeles market was perhaps not hit as quickly at the beginning of the cycle," he said.
Now, however, Southern California is feeling the pain, and it could last for a while; more than a third of respondents in the ACG survey said the M & A; environment will worsen in the next six months. But there may reason for hope as many firms are still looking to get deals done, Kolbrenner said.
"History shows that companies able to see beyond the current turmoil and capitalize on it by investing in growth well before the market turns will be extraordinarily positioned to benefit as the markets normalize," he said.
According to M & A; experts, the industry likely to experience the most activity in the coming months is the financial sector, which has seen tremendous upheaval. As the government's financial rescue program moves forward, many predict there will be consolidation within the industry as larger banks gobble up smaller rivals.
Share the Wealth
First, the big banks got their bailout funds. Now it's the little guys' turn.
Commonwealth Business Bank, Pacific Commerce Bank and Manhattan Bancorp, three Los Angeles-based institutions with a combined $626 million in assets, each announced that they have received approval to participate in the U.S. Treasury Department's financial rescue program.
More than 10 local institutions have received investments of as much as $395 million under the Troubled Assets Relief Program, including Beverly Hills-based City National Corp. and Pasadena-based East West Bancorp Inc.
Commonwealth said it will receive a $7.7 million infusion, Pacific Commerce will get $4 million and Manhattan has received $1.7 million.
"With this TARP money, coupled with an additional $13.7 million in capital expected to be received by the end of the year, we are in an excellent position to capitalize on current market opportunities," said Manhattan Chief Executive Jeffrey Watson in a statement. The bank expects to receive additional investment from Carpenter Fund Manager GP LLC, with whom the bank entered into a stock purchase agreement in May.
Meanwhile, a number of larger local institutions who had already received approval to participate have begun receiving their TARP funds, including Center Financial Corp. and Wilshire Bancorp Inc.
With an eye toward emerging opportunities in the battered housing market, Jam Equity Partners LLC, a Los Angeles-based private equity firm, has invested $2.5 million in Wingspan Portfolio Advisors, a Dallas-based mortgage servicer specializing in delinquent loans.
Wingspan uses a system called "Behavioral Outcome Decisioning," which combines analytics, research and close personal contact with delinquent borrowers to make the loans perform.
City National, the Beverly Hills-based holding company for City National Bank, announced two new appointments. Michael Dowling has been hired as a senior vice president and manager of City National's personal trust division, and Jodi Huston has been appointed senior vice president and manager of the Westside region of the institution's core banking division . Hanmi Financial Corp., the Los Angeles-based holding company for Hanmi Bank, announced that Jack Hall has been nominated to its board. The struggling bank recently entered into an agreement with federal regulators directing Hanmi to make changes to its board.
Staff reporter Richard Clough can be reached at email@example.com or at (323) 549-5225, ext. 251.
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