By Rachel Witkowski
American Banker
One reason for the shift is that competition to buy failed banks has driven up their prices.
When bidding for seized institutions, “you compete with a lot of people and you spend a lot of money on due diligence with no assurance that you will get the bank,” said Alex Cappello, chairman and chief executive of Cappello Capital Corp., an investment bank in Santa Monica, Calif.
An influx of equity to the market — despite the Golden State’s high unemployment rate, budget crisis and depressed real estate market — also played a big part in California General Bank’s deal to acquire Professional Business Bank in Pasadena and Los Angeles’ Grandpoint Capital Inc. agreeing to buy First Commerce Bancorp in Encino.
The deals, both announced this month, “were not driven by the [acquirers’] asset size. It was driven by the capital base and the availability of additional capital from the source,” said Rick Levenson, president of Western Financial Corp., an investment bank in San Diego.
Two deals may not sound like a lot, but they represented the most open-bank activity in a single month in the state since December 2009, according to SNL Financial LC.
Both deals would have drawn attention even in normal times because the buyers were much smaller by assets than the acquired banks.
“Just the fact that it got done in this environment is remarkable,” said Tim O’Brien, a research analyst at Sandler O’Neill & Partners LP in San Francisco.
In each case, the buyer is using a capital infusion from its parent’s equity fund to support the growth spurt.
The $59.7 million-asset California General Bank’s deal for its hometown competitor Professional Business Bank is saving the target from a cease-and-desist order, among other struggles.
Hardly two years old, California General was less than a quarter the size of Professional Business Bank, with $304.9 million in assets. But its parent company’s sole shareholder, a private-equity fund called Carpenter Community BancFund, injected more capital into the deal.
“Banks of this size don’t have enough capital to do a deal like that” on their own, said Brett Rabatin, a bank analyst at Sterne Agee in Birmingham, Ala.
Professional Business Bank’s president and CEO, Mary Lynn Lenz, said she spent the past 16 months approaching 57 different investor groups before she landed California General as a merger partner.
But that was only after Professional Business Bank was recapitalized by its parent’s fund, Belvedere Capital Fund II LP, in May, which made Belvedere the bank’s majority owner.
“A lot of stars had to be aligned to make this happen,” Lenz said.
O’Brien said California General’s willingness to make the deal would embolden other buyers for struggling open banks.
“Such a deal is noteworthy in that it can stimulate more non-FDIC-assisted transactions,” he said.
While analysts said First Commerce was not as distressed as Professional Business Bank, its deal with Grandpoint was another bullish sign for California, its problems notwithstanding.
“We have heard a couple banks indicate more willingness to look at [California banks], but selectively,” Rabatin said.
California has been viewed as a state with fewer strong banks and fewer large ones, making it less attractive for out-of-state buyers looking to build a sizable operation, he said.
Since July 2009, only nine open-bank deals were publicly announced that involved a seller from California, according to data from SNL. Four of those were announced this year, which included the two deals announced in July.
Meanwhile, M&A activity began perking up nationwide as a handful of open-bank deals were announced in the Southeast, Northeast and Pacific Northwest this month. Rabatin said the M&A announcements in the northern states in particular involved banks that were well capitalized and generally had better asset quality.
Others, however, argue that California banks’ potential is being underestimated while buyouts are low.
“California’s death has been greatly exaggerated,” Cappello said. “When this market turns around, California will be one of the most exciting markets to be in.”
His firm helped Hanmi Financial complete a $140 million common stock and rights offering this week. The bank raised more than the $100 million regulators had ordered it to raise by the end of July.
Month: July 2010
California's clean energy future threatened by federal delays, state officials say
By Marc Lifsher
The Los Angeles Times
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Plans for a massive expansion of clean energy in California are being jeopardized by federal foot-dragging, according to state officials who say that more than 20 nearly shovel-ready solar and wind projects are being held up by the U.S. Department of Energy.
Seven major solar-mirror projects — enough to provide power to 3 million Southern California homes — along with plans for at least a dozen wind-turbine and solar-panel complexes have been cleared or almost cleared by state authorities and the U.S. Department of Interior.
The projects are valued at as much as $30 billion, according to estimates by Gov. Arnold Schwarzenegger’s office.
But the Department of Energy’s laborious procedures to guarantee loans threaten to stymie construction financing for many of the projects, and builders could lose out on more than $10 billion in federal stimulus funding if they can’t start digging by the end of the year.
Ahmed Enany: Booster Shot
By Deborah Crowe
The Los Angeles Business Journal
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Entrepreneurs such as Al Mann and Patrick Soon-Shiong may be the public face of the biotech industry in Los Angeles, but industry insiders know another man as the region’s Mr. Biotech: Ahmed Enany, chief executive of the Southern California Biomedical Council. The organization holds networking events, investor conferences and promotes the industry. His early life had no hint of his eventual position. Enany came to the United States in 1978 on a fellowship with the intent to earn graduate degrees in political science at UCLA and return to his native Egypt to teach. Deciding that an academic career would bore him, Enany switched to urban planning and eventually became caught up with economic development initiatives created after the 1992 L.A. riots. Enany, who as a child considered becoming a surgeon before losing part of his hand in an accidental explosion, was particularly drawn to the area’s small growing biotech industry. Four years ago, he survived a rare form of cancer, which has made him only more determined to make the council a success. We caught up with the 54-year-old biotech industry executive at his downtown L.A. office, where he still runs a mostly one-man show backed by a part-time staff, and a bunch of volunteers and board members, including Mann. We discussed his life, career and how he developed a love for a city that he once disliked intensely.
Lessons from 1600 Pennsylvania Ave
Blair Herman is going into her senior year at the University of Southern California where she is studying business administration with a concentration in entrepreneurship and international business.
As Olmstead Williams Communication’s summer intern, I have had the opportunity to spend the last few weeks familiarizing myself with the business of public relations through helping in the day-to-day functions of the office. The other day Tracy kindly bought us all tickets to go to PRSA’s “Presidential Perspectives,” an event consisting of a panel of White House communications officials. The list of attendees consisted of: Camille Johnston, Director of Communications for First Lady Michelle Obama: Noelia Rodriguez, Press Secretary to First Lady Laura Bush: Sheila Tate, Press Secretary to First Lady Nancy Regan: and David Demarest, Directors of Communications for President George H. W. Bush. With such a prestigious cast, I was sure the evening would be full of tales straight out of The West Wing. To my surprise, the advice of the top communications professionals in the industry reinforced simple, common sense PR knowledge that all professionals would benefit to hear again. Here are some of their stories and advice:
Prepare for the unexpected
Best-laid plans often go awry, as when the terrorist attacks of 9/11 derailed First Lady Laura Bush’s plans to brief the Senate Education Committee, chaired by Edward M. Kennedy, on the findings of an early childhood development conference, an issue that was extremely important to her. As Mrs. Bush and Noelia Rodriguez quickly learned, flexibility and an ability to table long-held plans is a requirement when dealing with crisis communications. In all types of crises, not just on a historic scale, the more open to change one is, the quicker and more effectively one can respond.
Good PR is all about playing to the client’s strengths and personality
Public relations experts must intimately know a client’s strengths and weaknesses in order to enable their client’s best performance in public situations. When President George H. W. Bush was campaigning in Iowa, his speech writer made the mistake of having him quote a line from the famous Greek philosopher, Themistocles. I believe most of us are aware that, although a great leader in other ways, President Bush has a tendency to get tongue-tied when giving speeches. In a gesture of smart PR, the public relations person on site scratched out “Themistocles,” replacing it with “Plato.”
Proactive PR can go a long way
When First Lady Michelle Obama began planting her vegetable garden on the South Lawn, her main goal was to teach children about healthful eating in a time when obesity and diabetes has become a national concern. This innovative, proactive gesture helped Mrs. Obama form a great impression as the nation’s First Lady. When visiting dignitaries arrive at the White House, the first thing they ask to see is the famous vegetable garden. First impressions are a powerful tool for PR experts since good opinions, once formed, are harder to change than bad ones.
Proactive efforts can also serve the client by being a platform for action. A gesture, like the planting of the garden, can be a positive symbol that unites people behind an idea. In this case, Mrs. Obama used the publicity gained by the garden to form “Let’s Move,” a national campaign which she hopes will help solve the nation’s problem with childhood obesity within a generation. Without a proactive campaign, Mrs. Obama would not have the momentum and public support necessary for such an ambitious undertaking.
The hardest and most important part of Public Relations is telling the client when he or she is wrong…
…And the press secretary to the President of the United States probably finds this more difficult than most. However, when managing the reputation of a client, it is a PR professional’s duty to speak up when that client is about to make a mistake. One of the most important skills a PR expert can have is the ability to create and maintain open, honest channels of communication between client and agent. However, when President George H. W. Bush asks “Was anyone else in this room elected President?” it is time to back down.
Venture capital up a bit in region
By Mike Freeman
San Diego Union-Tribune
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Venture capital investment in startup San Diego companies increased during the first six months of this year but remains near its lowest level in 12 years.
Many venture capital firms have been forced to invest more money into their older, later-stage companies to keep them going, which has resulted in less investment in young startup companies.
In the second quarter, 71 percent of the money invested went to new or early-stage companies, compared with 35 percent nationally.
Still, venture capitalists are being cautious with their investments in younger companies, including those in life sciences, said Dan Kleeburg, partner with Ernst & Young, which also tracks venture capital investing locally in conjunction with Dow Jones/Venture Source.
“With the newer companies, one trend is tranche funding,” Kleeburg said. “That’s where a company might announce a deal that’s $20 million, but it’s being funded in pieces. So you get $5 million now, and then $7 million after reaching certain milestones.”
Many law firms are cutting back on summer internships
By Chris Mondics
The Los Angeles Times
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For top law school students, summer-internship programs at major law firms have helped open the golden door to lucrative full-time employment.
But at some firms, that door is starting to swing shut.
Many prominent law firms report substantially smaller internship programs this summer, as firms cope with the downturn in the legal marketplace and clients’ demands that only seasoned lawyers be assigned to their matters.
What’s more, firms are shortening their programs and paying summer associates less.
“It was definitely a challenging market for our students, and they did have fewer choices for this summer,” said Melissa Lennon, assistant dean in the office of career planning at Temple University Law School in Philadelphia.
Venture capital investments rebound in state
By Jason Bacaj
The Seattle Times
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Seattle metro area startups received $550.8 million in venture capital in the second quarter of this year — their highest amount of quarterly investment since late 2007, according to a report by Dow Jones VentureSource being released Saturday.
A $315 million investment in Liberty Dialysis, a health care services company on Mercer Island, inflated the number slightly, cautioned Tim Tasker, a venture capital expert with Ernst & Young.
Washington ranked third out of all states in terms of money raised, following California and Massachusetts, respectively, according to data from the Dow Jones VentureSource second-quarter report.
In a World of Online News, Burnout Starts Younger
By Jeremy W. Peters
The New York Times
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In most newsrooms, the joke would have been obvious.
It was April Fools’ Day last year, and Politico’s top two editors sent an e-mail message to their staff advising of a new 5 a.m. start time for all reporters.
“These pre-sunrise hours are often the best time to reach top officials or their aides,” the editors wrote, adding that reporters should try to carve out personal time “if you need it,” in the midafternoon when Internet traffic slows down.
But rather than laugh, more than a few reporters stared at the e-mail message in a panicked state of disbelief.
“There were several people who didn’t think it was a joke. One girl actually cried,” said Anne Schroeder Mullins, who wrote for Politico until May, when she left to start her own public relations firm. “I definitely had people coming up to me asking me if it was true.”
Such is the state of the media business these days: frantic and fatigued. Young journalists who once dreamed of trotting the globe in pursuit of a story are instead shackled to their computers, where they try to eke out a fresh thought or be first to report even the smallest nugget of news — anything that will impress Google algorithms and draw readers their way.
O.C. venture investing soars 117% in Q2
The OC Register
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Venture capital investments in Orange County companies rose 117% to $234.4 million in the second quarter compared to a year ago, according to Dow Jones VentureSource.
It’s the second upbeat report on equity investing this week, and is good news for young, high-growth companies after two years of struggle.
PricewaterhouseCoopers and the National Venture Capital Association said Orange County investment reached $279 million, up 206% from a year earlier.
The two reports have different methodologies but show the same upward trend.
Nationally, VentureSource reports 744 investments totaling $7.7 billion in the second quarter. This is the highest quarterly total for capital invested since the third quarter of 2008.
“Overall, Q2 for venture funding was pretty good,” said Kim Letch, venture capital expert in the Irvine office of accounting giant Ernst & Young. “Everyone was asking the question, ‘Is VC funding in Orange County done? But $234 million is pretty good.”
News sites reining in nasty user comments
By Stephanie Goldberg
CNN.com
User comments on news sites, while vital to interactive storytelling in the digital age, often read like scribblings on a bathroom stall: anonymous, offensive and full of hate.
“I hate what you people, and by that I mean the blacks, are doing to this city,” wrote one Buffalo News reader last month in response to a story about a local shooting. “Each area you move too [sic] quickly becomes over run [sic] with crime, loud music [at] all hours, adults swearing and screaming at kids, children playing in the street, porches with beer and garbage thrown all around.”
Rants like this one prompted the Buffalo, New York, newspaper to discontinue anonymous user comments on its website as of August 2. Commenters will be required to register with their name, city of residence and phone number — more information that most news sites require — and staffers will attempt to verify their identities.
“It is the ability to remain anonymous that encourages people to say whatever they want [online] … when people are required to give their names, our thinking is that they’ll think twice,” said news editor Margaret Sullivan, who added that vetting commenters will be a “challenging” task. “There might be people who slip through the cracks.”
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