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Monday, Oct 2, 2023


Like the prodigal son returning, Warren Woo has returned to the fold at securities brokerage Donaldson Lufkin & Jenrette Inc.’s Century City West Coast headquarters.

Managing Director Woo, 36, left late last year to take a position with Bethesda, Md.-based Snyder Communications Inc., which does marketing for Fortune 100 companies.

He also took options on 1 million shares of Snyder at $17, and the stock is up about $10 in Woo’s tenure there, closing at about $26.50 on May 20.

But Woo, who was in charge of corporate acquisitions for Snyder, said last week he wasn’t fully vested yet, though he begged off on giving details on the value of his options. Life is tough all over.

In any event, the head of corporate finance of DLJ, Ken Moelis, got Woo on the horn a few weeks back and beckoned him home.

Woo, a grad of UCLA and then Stanford’s B-school, had just lived through a clammy, sleety East Coast winter.

“I decided I liked Los Angeles better than Bethesda, Maryland,” he said.

Moelis, who works in Century City, is temporarily wearing not only the national mantle of DLJ corporate finance top dog, but is running the 90-person professional local office, due to recent departures of Peter Nolan and Susan Schnabel, both formerly managing directors. Moelis is also overseeing Hilton Hotels Corp.’s buyout bid for ITT Corp.

“(Moelis) put the heat on me to come back,” said Woo, who wouldn’t divulge further details. Woo may see action soon on a management level at DLJ, and is known for expertise in the lodging-casino sector.

We remember Moelis at a DLJ Christmas party last year, bemoaning Woo’s departure with outstretched arms.

We also remember DLJ economist Richard Hokenson confidently predicting a recession in 1997, and a 40 percent tumble in corporate profits.

So far, Woo is back, and no recession.

Adding staff

With the market for mergers and public offerings so strong for so long (with just a few burps here and there), it is not surprising to see some of the national brokerages are beefing up their Los Angeles operations.

Prudential Securities Inc., for example, has just added three veterans to its now 10-person Los Angeles cadre of investment bankers.

Kevin Shultz, Dennis McCarthy and J. Michael Christiansen, all formerly of the boutique investment banking shop The Wescott Group, have joined Prudential in its Gateway Plaza offices on the Westside. “We brought over our own furniture, Rolodexes, even paper clips,” said Shultz.

Now Prudential managing director, Shultz will help run a group angling to put together middle-market deals (minimum $25 million for initial public offering and $10 million for private placement) for companies involved in non-traditional retailing.

New York-based Lehman Bros. just added Todd Zelek and Philip Erlanger to its eight-person Los Angeles shop; both are industry veterans. Zelek will focus on industrial and high-growth companies, and Erlanger on finance companies.

Other investment banking shops, from boutiques to major wire houses, are looking to add to staff in Los Angeles this year.

The last time that happened was in the late 1980s, when the major houses, following the lead of now-defunct Drexel Burnham Lambert Inc., which had 200 professionals in Beverly Hills, began to beef up staff here. Then, when the early 1990s resulted in a slowdown of M & A; and securities activity, many shops were cut.

Shultz of Prudential (a former Drexelite) said this go-round feels more permanent. “You don’t see the kind of overleveraged transactions you saw in the late 1980s,” he said. “And the economy looks great. This feels like it has legs.”

Executive pay

Executive pay sticks in Jeffrey Bronchick’s craw, especially when performance is only par, or even below par.

“Our focus is the absolutely pathetic nature of the most executive compensation plans,” said Bronchick, principal at Westside money manager Reed Conner Birdwell Investment Management Inc., which has $800 million in assets.

“We have no problem with executives making obscene amounts, as long as the game is not rigged from the start,” writes Bronchick in his newsletter.

Among other reforms, Bronchick suggests that managements no longer receive stock options at the market price, but at a strike price above market, and that they buy the options with hard cash in other words, they actually lose money if the company doesn’t perform.

Too, Bronchick is not happy to see directors pull down $30,000 a year just for showing up at a quarterly meeting, and he calls for directors to also receive incentives perhaps paid in stock, not cash.

Bronchock’s sentiments come at a time when shareholders’ clout may be massing. Due to the growing size of mutual funds and pension funds, institutions control more and more of the market and higher percentages of any particular stock. As we have noted, local thrift giants H.F. Ahmanson & Co. and Great Western Financial Corp. are heavily (90 percent-plus) owned by institutions.

However, what the institutional shareholders have always lacked is coordination, said Robert Apfelberg, Woodland Hills lawyer and former Cal Fed board member.

Apfelberg believes the next step for institutional shareholders is to form alliances (now legal under SEC rules) so that corporate managements know they are accountable. “It’s just a mindset,” said Apfelberg. “You see creditors form committees. Management is coordinated. But shareholders aren’t.”

Historically, shareholders have been too fragmented to do much in the face of management arrogance, and the simple solution was to sell a stock if one didn’t like the action, said Apfelberg.

But institutions have a harder time unwinding positions, and there is a concentration of ownership in theory, it should be a lot easier to organize 10 major institutional shareholders than hundreds of individual shareholders, said Apfelberg.

Senior Reporter Benjamin Mark Cole covers the investment community for the Los Angeles Business Journal.

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