“When you are in the auto repair industry, and you have a name like Hunt Ramsbottom, you gotta’ be tough. That’s why I backed him.”
That quote is from Peter Nolan, managing director at investment house Leonard Green & Partners LLP, and he is describing the chief executive of Santa Monica-based M2 Automotive Inc.
M2 is an auto body repair company that plans to go public someday, though no papers are yet filed with the SEC. You might think auto body repair is a bit on the plebeian side for pin-striped financial types like Nolan, but Ramsbottom not only has Nolan in his corner, he has El Segundo-based Chase Capital Partners and Los Angeles-based Heller Financial as venture capital backers.
Nolan, formerly of Donaldson Lufkin & Jenrette Securities Corp. in Century City, sits on M2’s board as a personal investor (Leonard Green & Partners isn’t in because it’s not a venture-type firm). David Ferguson, managing partner at Chase Capital, is also on M2’s board.
Ramsbottom’s plans are to develop a chain of auto body repair shops across the Western United States, converting much of what is a mom-and-pop industry into a national franchise. As with most industry consolidations, also called roll-ups, Ramsbottom’s plan involves using economies of scale, marketing power and managerial expertise to bring a better deal to consumers, and of course, carve out a hefty chunk of the industry.
Ramsbottom already has 22 shops up and running, including an 85,000-square-foot shop in Santa Monica what he says is the nation’s largest auto body repair shop.
The 40-year-old Ramsbottom, a Rhode Island native, started up M2 after leaving Thompson BPE Inc. in 1996. That $210 million-in-sales company, which supplied paints, filler and other goods to the auto body industry, was taken public by Ramsbottom in 1995, and has since been acquired by Indianapolis-based FinishMaster Inc.
Look for Ramsbottom to take M2 public as well. “(Issuing stock to the public) is an appropriate thing to do,” Ramsbottom said. “Establishing a chain across the Western United States requires a tremendous amount of capital.”
BankAmerica Corp. has kept a low profile in L.A. investment banking circles, despite what turns out to be a very active middle-market practice here. How active?
“In 1997, we underwrote $1.1 billion in private equity for local companies,” said John Murphy, managing director for corporate finance in Los Angeles.
In those deals, BofA connected local companies to institutional investors for private transactions not registered with the SEC. Of course, you can’t say “investment banking” without at least mentioning BofA’s October acquisition of the Bay Area brokerage now called BancAmerica Robertson Stephens. But even before that deal, BofA was active in providing merger financing, private debt and equity, even high-yield debt essentially everything except underwriting stocks or bonds to be issued to the public.
Despite its low profile, BofA was involved in some pretty sexy deals last year, including raising $26.5 million in a private bond offering placed for Hollywood Studios Center Inc., which runs sound stages devoted to TV programming production.
BofA also served as co-underwriter on a high-yield debt offering of $125.5 million for Hollywood Park Inc., the gambling and horse track operators.
There may be a big plus for Los Angeles firms in the BofA-Robertson Stephens merger, said Murphy: BofA clients, worthy of going public but overlooked by the powerful Bay Area brokerages (including NationsBanc Montgomery Securities Inc. and Hambrecht & Quist), now will have a pipeline to an investment house. BofA bankers with L.A. client companies that want to go public will refer them to Robertson.
As a result, more local companies might get underwritten by BancAmerica Robertson Stephens than were underwritten by Robertson Stephens prior to its acquisition, said Murphy.
Since 1991, Robertson Stephens has taken more high-tech companies public nearly 350 than any other underwriter, according to the New York-based Securities Data Corp. These guys have worn a path to the SEC.
“We fully intend to capitalize on our relationship (with BancAmerica Robertson Stephens),” said Murphy. “We call it ‘soup-to-nuts’ finance. Whatever a middle-market company needs, from a revolving credit line to going public, we can do it for them.”
Spotted recently on the wall of downtown’s The Jonathan Club: a photo of the chairman of distressed-debt buyer Libra Investments LLP, Jess Ravich. That’s the drill for those who have been recommended for membership. And Ravich is being recommended by some big names in L.A. corporate finance circles: John Hartigan, the prominent securities lawyer with the downtown offices of Morgan Lewis & Bockius, and John Kissick, partner with Beverly Hills-based Apollo Advisers LLP, the huge investment fund, and formerly, of course, of Drexel Burnham Lambert.
Who says the old downtown clubs have lost their clout?
This is getting to be a ritual: At the end of every year, we ask experts what the stock market, and the merger market, will be like in the coming year. For three years running, we have heard something like, “Oh, the Dow may go up 10 percent don’t look for another repeat of last year.”
On the mergers side, we hear, “It can’t be this hot again.”
Well, as of early last week, the Dow was already up more than 8 percent in the young year, while through the first six weeks of this year, there were more mergers, both in dollar volume and in number, than in the like period a year earlier, according to Mergerstat, an arm of the Century City finance shop Houlihan Lokey Howard & Zukin.
There were slightly more than $68 billion worth of announced mergers nationwide through Feb. 15, up from about $66 billion in the year-earlier period, and 917 mergers, up a bit from just under 900 in the like period a year ago, according to Mergerstat.
Contributing reporter Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal.