Santa Monica-based investment bank USBX Advisory Services LLC has opened a Costa Mesa office to tap the Orange County market for mergers and acquisitions and other investment services.
“Orange County has a strong middle market community,” said John Mack, chief executive of USBX Advisory Services. “The economy is reasonably strong here and there is a big volume of activity in the middle market segment.”
Joe Gerber is leading the OC operation and plans to focus on providing M & A; services to clients in Southern California and also the rest of the U.S.
“I looked at a number of companies (to join),” said Gerber, who is the managing director at UXBX. “They (USBX) made it very easy for me and my clients,” he said. “I decided very quickly that they were the right match.”
To start with, Gerber will be working with one analyst in the OC office. He said that depending on the business climate, USBX would decide on hiring more professionals in the first quarter.
“I would rather not grow the office too quickly,” he said.
USBX focuses mainly in the middle market segment, which is defined as deals valued at $5 million to $100 million.
“Right now I have a full plate of clients,” Gerber said.
“I am not surprised that Orange County is coming to attention of new advisory companies here,” said Andy Graham, senior vice president in charge of Los Angeles-based Barrington Associates’ 6-month-old OC office. “I think this is a great market and there is room for additional competitors.”
Investment banks have been setting up offices in OC because of the relatively large number of middle market companies here.
Gerber joined USBX from Emerge Corp. where he was a managing director with responsibilities that included structuring and closing acquisitions, leveraged and management buyouts, as well as re-capitalization and re-financing work.
Emerge was formed in 1998 to cater to the middle market segment. The company is backed by Emeryville-based Pacific Mezzanine Investors.
Gerber said that in a good market he would average about eight to nine deals a year with a total deal value of $300 million to $500 million.
Mack formed USBX Advisory Services a couple of years ago. The firm has raised $20 million in funding from investors such as The Catlyle Group, Avalon Capital Partners and Evercore Ventures.
The firm has about 15 investment bankers and analysts. Mack said that one of the reasons his firm received funding from large institutional investors is because of the void in the small- and middle-market segments, which few Wall Street firms serve.
“We saw a nice opportunity to build an investment banking firm in the middle-market area,” Mack said. Mack also said that his firm would continue to expand in Southern California and later Northern California.
But while the OC market is large, many say that starting an office right now is challenging.
For one, local M & A; activity has slowed significantly since the beginning of the year. And, for another, valuations have fallen.
“This is not a great market, so people will need great staying power,” Graham said. “Right now it is going to be a slower market for anybody. Organizations with depth, resources and demonstrable experience will make it through this cycle.” n
