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Thursday, Sep 29, 2022

Investment Firms Put Their Money on Los Angeles

People think there’s not a lot of investment banking in Los Angeles because the county lacks Fortune 500 companies and the titans of Wall Street.

But Los Angeles, in fact, is home to a surprising number of firms that handle the deals of the business world, including mergers and acquisitions, equity offerings and recapitalizations. The local players range from established institutions to specialty boutiques and startups.

That’s the view of Alexander L. Cappello, founder and managing director of Cappello Capital Corp. in Santa Monica, No. 6 on the Business Journal’s first list of investment banks. (See page 21.)

And because of the nature of the L.A. investment banking world, it’s a more stable environment.

“The big firms come and go with recessions,” he said. “With the boutiques, we’ve all been in the community for a long time and we’re not going anywhere. We’re not looking to do a build-and-flip sort of thing.”

Mike Rosenberg, chief executive of Intrepid Investment Bankers LLC in Los Angeles, agrees.

“Los Angeles doesn’t get credit for how robust a deal market there is here,” he said. “But it’s quite significant.”

Cappello’s company has 21 licensed brokers and 39 total employees, with headquarters on the 12th floor of a building with a view of the Santa Monica Bay.

The list starts with No. 1 Houlihan Lokey in Century City, with 110 licensed brokers and 243 total employees as well as a new office in Newport Beach, and finishes with No. 25 William & Henry Associates, a boutique firm in Century City with five brokers.

Cappello, 57, started his firm nearly four decades ago. He now has 10 offices, including posts in Seoul, South Korea, and Taipei, China – the firm’s international character is illustrated with antique globes and foreign flags that decorate its L.A. headquarters. The company specializes in cross-border deals, such as Seoul food company Pulmuone Holdings Co. Ltd.’s acquisition of Salinas firm Monterey Gourmet Foods Inc. for $46 million in 2009.

Many of the company’s deals are private. Cappello did $5 billion in transactions last year, compared with about $4 billion the previous year. Both years counted 28 deals, including M&As and recapitalizations. In December 2012, for example, the company helped with a debt recapitalization by Smart Start Inc. in Irving, Texas, which sells alcohol monitoring technology such as breathalyzers.

Activity appears to be on upswing after the recession years.

“Some of it is pent-up demand that was waiting over the past few years and has decided it is safe to get back into the water,” he said.

Lloyd Greif, chief executive of Greif & Co. in downtown Los Angeles, said deal-making in Los Angeles is strong because the economy is showing signs of life and banks and private equity firms are eager to put their money to work. He said the region benefits from the diversity of its economy and entrepreneurs. “It’s a very much entrepreneurial environment,” he said. “There’s more of a Wild West atmosphere out here.”

Decidedly middle market

Intrepid Investment Bankers, No. 7 on the Business Journal list, was co-founded by Rosenberg and Jim Freedman, who sold their previous firm, Barrington Associates, to Wells Fargo Securities LLC in 2006. They launched Intrepid with five other partners when they left Wells in 2010.

Intrepid, which has 17 licensed brokers, did 10 deals in 2012. The West L.A. company specializes in industries including business services, health care and licensed consumer products. The company is making a big push into apparel and accessories, a key L.A. industry.

Because Los Angeles isn’t home to big companies, the world of investment banking is decidedly middle market, Rosenberg said, which keeps things “fairly stable.” He expects 2013 to be strong.

Duff & Phelps Corp., No. 4 on the list, is a New York company with 73 employees in Los Angeles. It did $12.6 billion in deals here last year.

Sherry Cefali, a managing director who heads the L.A. office in Century City, said that while M&A deals overall have slowed down, other services are strong, such as restructuring.

The L.A. office of Duff & Phelps is handling the restructuring of Chinese solar company Suntech Power Holdings Co. and Polish vodka producer Central European Distribution Corp.

Duff & Phelps, which last year agreed to be acquired by a team of investors led by Carlyle Group LP, has specialists in industries such as media and entertainment, technology and telecom, and aerospace and defense.

It recently worked on the $800 million debt and equity recapitalization of Palo Alto Web company SurveyMonkey. The firm was hired to give an opinion of the transaction, which closed in February.

Specialization is becoming more important to local firms, particularly in the industries that are prevalent in Los Angeles, such as aerospace and media.

“Investment banking has become very competitive and the way to differentiate yourself is to really know your industry niche,” she said. “It’s really becoming the way of the future.”

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