An Irvine-based consulting firm is buying two Southland consulting shops, including high-profile Century City public relations firm Sitrick & Co., which has represented a raft of bankrupt corporations and image-challenged executives.
Resources Connection Inc., which was spun off as a public company from accounting giant Deloitte & Touche in 1999, said it plans to combine Sitrick and Riverside-based Brincko Associates Inc. into a subsidiary specializing in corporate advisory and restructuring services.
The unit will be headed by Michael Sitrick, founder and owner of Sitrick & Co.
The deal has an initial payment of $43.3 million, with $28.2 million of that in cash. The remainder will be paid in restricted Resources Connection stock. In addition, the new subsidiary, to be called Sitrick Brincko Group, will receive performance-based payouts over the next four years, up to 20% of which will go to employees other than Michael Sitrick and Brincko owner John Brincko.
Because Sitrick’s firm is considerably larger, it is believed that he will get the bulk of the purchase price.
Sitrick specializes in “crisis communications,” representing companies in bankruptcy and people caught up in corporate or personal scandals. Brincko advises companies that are restructuring or reorganizing in bankruptcy. The firms had combined revenue of $24.4 million last year and pre-tax profit of $10.5 million.
Sitrick is known for handling clients that make frequent appearances in newspaper headlines and paparazzi photos. The firm has represented some 300 clients during bankruptcy proceedings over the last two decades, including such hot potatoes as WorldCom Inc., Global Crossing Ltd. and the Orange County government. The firm also represented the Archdiocese of Los Angeles when it was dealing with charges of sexual abuse by its priests.
Michael Sitrick, 62, who wrote a book titled “Spin: How to Turn the Power of the Press to Your Advantage,” has also gone to bat for such celebrities-in-distress as actress Halle Berry, radio talk show host Rush Limbaugh, Broadcom Corp. co-founder Henry T. Nicholas III and Jamie McCourt, wife of Los Angeles Dodgers owner Frank McCourt.
With the U.S. economy struggling to emerge from the worst recession in decades, Resources Connection is expecting no shortage of business from companies filing for bankruptcy protection and believes the time is ripe for expansion.
“All one has to do is to read the daily headlines to see why we are so excited about this acquisition,” said Donald B. Murray, chief executive of Resources Connection.
“Despite predictions that the recession is over, the business landscape remains littered with troubled companies and indeed whole industries. . . . We believe this transaction provides significant opportunities for growth.”
Public relations has become an increasingly crucial part of bankruptcy proceedings as companies seek to get their version of events across to customers, suppliers, employees, government officials and the media.
“The communications aspect of this business has become more and more important over the last 10 to 15 years because you’ve got so many different audiences that you have to reach,” said D.J. Baker, co-head of the restructuring practice at the law firm Latham & Watkins. “It’s not just a matter of putting out a press release to the local paper anymore.”
Resources Connection has more than 2,100 clients worldwide and employs more than 2,700 people in 82 offices around the globe. The company reported revenue of $685.6 million and net income of $17.8 million in its most recent fiscal year.
The deal was announced after the market closed. Resources Connection’s stock, which rose 6 cents to $17.28 in trading Thursday, is up 5.5% this year.
Sitrick, who founded his firm in 1989 and has been approached in the past about selling, said it was the Irvine firm’s global reach and corporate culture that finally turned his head.
“I’ve been a ‘runaway bride’ several times,” he said. “I don’t need to do this. I’m doing it because it gives me a global platform and an opportunity to provide real value to our clients in a variety of ways.”
Sitrick & Co. employs about 60 people, including 45 client service personnel. No layoffs are planned as a result of the acquisition.
Sitrick will have the titles of CEO and chairman of the new subsidiary. John Brincko will be president and chief operating officer. They will sign 54-month employment contracts when the deal closes, which is expected to occur within 30 days.