January 28, 2011 –At first blush, Houlihan Lokey may appear to be a
specialist in middle-market companies, but as its co-chief
executive, Jeff Werbalowsky, will tell you, its work
goes well beyond that.
"While our corporate finance group targets the middle market,"
its financial advisory services "and restructuring groups are very
active in the larger end of the market as well and are normally
involved in the biggest deals in the world," Werbalowsky said
after his firm received IDD's Mid-Market Bank of the Year award.
Like many boutique or middle-market investment banks, the
four-decade old firm brought in more talent during the credit
crisis. It has added 30 senior bankers over the last two years. It
filled a major void and augmented its capital services capabilities
in May through a joint marketing alliance with the electronic
trader Knight Capital, and it established a foothold in India and
Southeast Asia in July with a strategic investment in the Mumbai
investment bank Avista Advisory Group.
"Those are three very exciting things that occurred in 2010
and will carry into 2011," said Scott Adelson, a senior managing
director and co-head of corporate financing.
Werbalowsky admitted that expanding the staff in a difficult
financial environment was not easy. "Out of the depths of 2009,
we figured this was the time to expand in corporate finance and
FAS, where there was a lot of disappointed and dispirited talent
looking for a better and more stable place to build their careers,"
he said. "However, it is fiscally and emotionally difficult to hire
aggressively when your own dollars aren't expanding in an area
and prospects look bleak."
Houlihan and its largest shareholder, Orix Corp. of Japan,
though, believed it was time to build up those areas, and they
"made a strategic and financial commitment in those embattled
segments," Werbalowsky said.
Last year, Houlihan remained the most prolific middle-market
financial adviser in the U.S., according to Thomson Reuters.
It completed 111 such deals three fewer than it did in 2009 but 23 more than runner-up Goldman Sachs. Those 111 deals were
worth $6.6 billion and generated $177.6 million of fees for the
"Going into 2010, we faced a threefold challenge: to overcome
the difficulties in the market and opportunistically build our
business in corporate finance and FAS; to aggressively work for
our restructuring clients and translate an improving economy
into higher recoveries for them; and to continue our international
expansion in the face of retrenchment from many of our competitors,"
Restructuring has always been a Houlihan sweet spot, he said.
"In difficult years like 2009, well over half our business is restructuring.
In 'bullish years,' it's well under 50%." Worldwide, as of mid-January, the firm was working
on about 45 restructuring transactions in
and out of court.
Houlihan ranked second among advisers
of distressed companies worldwide
last year, when, said Dealogic, the global
restructuring market declined 6.2%, and
advisers working with troubled companies
were involved with $305.1 billion of
The corporate workout pros at Houlihan
will tell you the March balance-sheet recapitalization
of Education Media and
Publishing Group - the world's largest
publisher of educational materials for
pre-kindergarten through grade 12 - was
one of their most noteworthy assignments.
Houlihan was the exclusive financial
adviser to EMPG's bank debtholders.
Also, Houlihan was the exclusive financial
adviser to the official unsecured creditors
committee in the bankruptcy case
of real estate investment trust General
Last year, Houlihan advised Diedrich
Coffee on its May sale to Green Mountain
Coffee Roasters for $290 million, or $35 per share. The deal featured a
bidding war between Green Mountain
and Peet's Coffee & Tea, along with a
Federal Trade Commission antitrust
challenge of Green Mountain's bid.
in Asia has a long
way to go, although
we've made some
good hires," says
Last summer, Houlihan purchased Red
Pine Advisors, a two-and-a-half-year-old
New York firm that values complex structured
securities. When it announced the
deal, Houlihan said it anticipated a steady
pickup in demand for independent assessments
of securities held by banks, hedge
funds and insurers.
Werbalowsky envisions a bigger international
operation. In December, his firm hired Marc Ellegaard as head of FAS
business development for Europe, the
Middle East and Africa, and Nicolas Zintl in Frankfurt, was tasked with expanding
the merger and acquisition advisory business
"We are committed to doing more business
in Europe generally," Werbalowsky
said. "Goldman, Oak Tree, Fortress,
Centerbridge, TPG - their investment
environment is the entire world. We need
to be where they are. We've taken gradual
steps into India and Singapore through a
strategic minority investment in Avista.
We have offices in Tokyo, Beijing and
Hong Kong, but our performance in Asia
has a long way to go, although we've made
some good hires and are getting traction."
Last year, Houlihan hired Eileen
Kamerick as its chief financial officer and
Jake Foley as a managing director in the
financial sponsors coverage group.
Werbalowsky says it wants to cover
more middle-market private-equity firms.
"Over the last five years, we've substantially
ramped up our coverage, but we want to
do a better job."