Los Angeles Los Angeles County firms in the private equity, venture capital and investment banking sectors were involved in some of the largest and most noteworthy deals in the U.S. last year.
Among those was the $6.9 billion sale last May of Chicago-based Tribune Media Co., a portfolio company of downtown-based Oaktree Capital Management, which was No. 4 on the Business Journal’s list of the top 44 private equity firms in L.A. County ranked by assets under management.
The area last year also saw its largest initial public offering, as Venice-based Snap Inc. raised $3.4 billion to set a new local mark.
The year was particularly stellar for local private equity firms based here. The 44 on the Business Journal’s list this week increased their assets under management by 22 percent in 2017, for a total of $141 billion (list starts on page 12).
Century City-based Ares Management held its No. 1 spot with $25 billion under management, followed by No. 2, Sawtelle-based Leonard Green & Partners, which saw its assets leap 64 percent to $23 billion year-to-year. Kayne Anderson Capital Advisors moved up two spots to No. 3 by almost doubling its assets from the year before, and now manages $22.7 billion in assets.
“What I’ve seen across the L.A. market is that you continue to see private equity firms get larger and larger,” said Adam Feit, Los Angeles market president for Union Bank.
There were some big money moves for liquidity and some large reloads last year.
Top-listed Oaktree Capital sold almost $12 billion of its portfolio, including the $4.4 billion sale of Ohio-based food producer and distributor AdvancePierre Foods Holdings Inc. and the $967 million sale of Tembec Inc., a paper company in Montreal.
Beverly Hills-based Platinum Equity, ranked No. 5, closed a $6.5 billion investment fund in March 2017 from more than 200 limited partners in 28 countries, the company said.
“Our expanded access to capital combined with investments we’ve made in recent years to grow our team has opened doors to more opportunities. We closed more than 20 acquisitions last year across a broad range of different industries,” Mark Barnhill, partner at Platinum told the Business Journal via email.
He expects 2018 to be a good year too.
“That momentum has carried through this year and we’ve already completed eight new acquisitions in the first quarter,” he said.
Union Bank’s Feit said he has noticed an L.A. trend of executives leaving big firms and starting their own companies.
Examples include Brentwood-based LightBay Capital, formed by former Ares Management employees; Sawtelle-based Solace Capital, founded by former Oaktree employees and Nolan Capital Inc. in Hermosa Beach, which was started by former Leonard Green employee Peter Nolan.
Investment banks, which generally don’t disclose deal volume dollars, saw a 10.6 percent year-over-year leap in the number of employees licensed by Financial Industry Regulatory Authority Inc., or FINRA, a nonprofit federally-authorized oversight agency (list starts on page 17).
Houlihan Lokey, No.1 on this week’s list, grew its number of licensed bankers more than 9 percent to 132 in 2017, and increased its deal-making 7 percent to 281 last year. No. 2, Moelis & Co., with 51 licensed bankers, expanded by 4.1 percent while Duff & Phelps leaped four spots on the list to No. 3 by increasing its bankers’ ranks 33 percent to 28 bankers. All three companies are based in Century City.
“2017 was the year of the strategic buyer,” said Lloyd Greif, chief executive at downtown’s Greif & Co., ranked No. 20 on the list with 12 licensed bankers. “Last year we saw a record breaking stock market, there was synergy. It brought up the valuation of the strategic buyer, positioning them better. Here at my company, we were able to get them to outbid private equity firms.”
The amount of capital under management for venture capital firms in Los Angeles grew 12 percent year-over-year in 2017, according to the Business Journal’s list (list starts on page 21). However, for the second year in a row, the sum of venture capital dollars invested into L.A.-area companies fell 8.6 percent to $3.2 billion from the year prior, according to a report by Dow Jones VentureSource released in January.
Compare that to 2015, the region’s best year for venture capital funding, when companies raised a total of $4.17 billion.
Investment into the L.A. area remains healthy despite the year-to-year dip among local VC firms, Jeff Grabow, U.S. venture capital leader at Ernst & Young, told the Business Journal earlier this year.
Santa Monica-based Upfront Ventures, No. 1 on the list, grew 25 percent after launching a $400 million fund which closed last June. The firm now has $2 billion in capital under management.
“We are excited about our existing portfolio,” said Greg Bettinelli, partner at Upfront Ventures. “I can tell you that we’re thinking of investing half of what we have, $1 billion, into Southern California businesses.”
Some companies Upfront has funded include Santa Monica-based Ring, makers of home security products, and acquired by Amazon.com Inc. in February in a deal estimated to be worth $1 billion. Bettinelli said that L.A.’s venture capital ecosystem has evolved over the last five years or so.
“We’ve seen several big companies emerge like Snapchat (Snap Inc.), (Space Exploration Technologies Corp.) and Ring,” he said. Because of that, talent is also staying in the area, he added.
“For years we’ve had good talent that was schooled locally leave for the Bay Area or New York but now they are staying back because there is opportunity.”
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