Houlihan Lokey shares rise in trading debut
Scott Beiser, fourth from left, Houlihan Lokey’s chief executive, rings the New York Stock Exchange opening bell Thursday.
Houlihan Lokey Inc. was an advisor on some of the most famous debt restructurings in U.S. history, including the Lehman Bros. and Enron Corp. bankruptcies.
But the boutique investment bank based in Century City, which also advises on corporate mergers and acquisitions, is looking for more recognition — the kind that leads to added business and attracts promising new hires.
“There are still thousands of executives and board members who have not heard of our firm or heard the totality of our story,” said Scott Beiser, Houlihan Lokey’s chief executive.
Houlihan Lokey went public with an initial stock offering Thursday partly to help combat that problem, with insiders selling 10.5 million shares for $21 apiece.
The IPO was priced below the $22 to $24 a share that Houlihan Lokey had estimated might be the offering price. But the stock quickly climbed as trading began and closed at $22.40 a share.
The Class A common shares were sold by Houlihan Lokey’s major owners: Orix USA, a U.S. arm of the Japanese investment conglomerate Orix Corp., and the firm’s executives and directors.
Those owners continue to control the firm mainly by holding its Class B stock, which has superior voting rights to the Class A stock being traded publicly under the ticker symbol HLI.
The stock sale wasn’t about Orix or Houlihan Lokey’s employees simply wanting to cash out part of their holdings, Beiser said in a telephone interview after he rang the opening bell at the New York Stock Exchange on Thursday.
And with insiders selling, none of the proceeds went to Houlihan Lokey itself.
“We really didn’t need the capital; the business is a strong cash-flow generator,” Beiser said.
Instead, Beiser said, “the business has grown year after year and we hit the stage where the presence and reputation we have can be further enhanced by going public. This is something that’s been building for a couple of years.”
Houlihan Lokey has about 980 employees in nearly 20 offices worldwide. In its fiscal year ended March 31, the firm earned $79.9 million on revenue of $680.9 million, according to its prospectus.
Its annual revenue had jumped 31% from just two years earlier, when it totaled $520.3 million.
The firm was founded in 1972 by Richard Houlihan and O. Kit Lokey to provide accounting, valuation and other financial services to privately held companies, including financially troubled ones.
Orix bought control of the firm in early 2006 for $500 million in cash and stock.
Despite its bankruptcy advisory work with giants such as Lehman and Enron, many of Houlihan Lokey’s services today — including merger advice, restructurings and capital-raising — are tailored for mid-size corporations, also called “mid-cap” companies in industry jargon. It’s a leading advisor on mergers and other transactions valued at less than $5 billion.
The market for mergers and acquisitions, or M&A, has been red hot this year partly because acquiring companies are taking advantage of low interest rates for any borrowing needed to get deals done.
But Beiser said “we see our growth not so much tied to a particular M&A cycle but to the overall [corporate] activity in the mid-cap space that continues to grow.”
Houlihan Lokey also is following the move by another boutique investment bank, Moelis & Co., that went public last year. Moelis, whose IPO was priced at $25 a share, closed Thursday at $29.87.
Houlihan Lokey has been busy in the mergers field itself to bulk up its menu of services.
In June, for instance, the firm acquired Mesa Securities Inc., which provides merger advisory services to the media and entertainment industries, for an undisclosed price.
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