Crain’s Cleveland Business Archives: Brown Gibbons Refocuses

There’s a change in direction coming about at Cleveland investment banking firm Brown, Gibbons, Lang & Co. The firm, known primarily for working middle-market merger-and-acquisition deals, is redirecting its efforts toward the growing restructuring field, said principal Mike Gibbons. Brown Gibbons also is close to inking a deal to acquire a New York office that would expand the firm’s East Coast presence.

As the M&A market softens due to the weakened economy, Brown Gibbons is taking on a lot more work in the restructuring arena – an area almost untapped by the firm in recent years, Mr. Gibbons said.

We’ve gone back to our roots as a restructuring firm,” he explained. -We’re shifting personnel from merger and acquisition to prepare for an effort in restructuring.” Brown Gibbons isn’t dropping its business of brokering M&A deals between companies valued at between $30 million and $500 million, but it’s shifting its focus because we can chase mergers and acquisitions until we drop, but we have 30 bankers to keep busy,” Mr. Gibbons said.

When the economy was running at full steam, many companies financed acquisitions and debt through banks and other lenders, but found themselves overleveraged when their growth slowed, said Scott Berlin, Brown Gibbons’ senior vice president and head of the restructuring group.

“With the tightness in the lending markets in the last six to 12 months, the ability to borrow is reduced,” Mr. Berlin said.

So, Brown, Gibbons works to find alternatives such as mezzanine and equity financing for the companies while keeping them out of bankruptcy, Mr. Berlin said.

“And if companies have to sell some non-core assets, we can do that,” Mr. Berlin said. “We can draw on our other areas of expertise of being able to sell companies and (finding) other sources of funds.”

The firm still is working on 10 M&A deals, but it already has closed about 18 restructuring deals in 2001, Mr. Gibbons said, Brown Gibbons Lang is working on 13 restructuring projects both in Ohio and throughout the country, primarily with companies in the manufacturing, industrial and distribution sectors.

By comparison, Brown Gibbons completed just two restructuring deals in 1999 and 2000, none in 1998 and two in 1997. During that same period, the firm completed 40 M&A deals, Mr. Gibbons said.

To handle the surge in restructuring deals, Mr. Gibbons said the firm is looking to hire four or five associates and analysts in the next 12 months. It already has 40 people in offices in Cleveland and Chicago.

Another way of beefing up its restructuring efforts is by opening a new office. The firm is close to striking a deal with a New York restructuring specialist that could give it the talent and a location to expand its reach in the eastern United States, Mr. Gibbons said.

“We already do business on the East Coast,” he explained. “But this individual merits the consideration of opening an office and building it around him.”

Mr. Gibbons declined to disclose the name of the person and company with whom he was talking. He said a deal could be finalized as early as this week.

Meantime, Brown Gibbons will be ready when the market shifts back toward M&A deals, he said.

“We’re going to continue with M&A because we know it will be back,” Mr. Gibbons said. “Everything goes in cycles. If the credit market improves, there will be pent-up demand and we’ll be ready to do that, too.”

By: RYAN CORNELL

Volume: 22

Publication number: 37