Activity 'bursting at the seams'.

LAST year may not have set the record at Los Angeles mergers and acquisitions specialists had hoped for, but who's complaining--it certainly came close.

Through November 2006 dealmakers were busy working local and national pipelines that saw a succession of iconic L.A. companies and innovative smaller firms change hands or bulk themselves up in 763 transactions totaling at least $94 billion.

And aside from a catastrophic event upending the capital markets, a continued strong economy and favorable interest rate environment should create conditions for a repeat in 2007. Credit that to the $175 billion in private equity raised in 2005, plus the $160 billion estimated for 2006, yet to be deployed.

"Everybody that I know in M&A right now is bursting at the seams," said Ed Villeneuve, Los Angeles-based managing director for investment bank Goldsmith Agio Helms. "I'm working on more deals now than I ever have in my life."

Last year's busy pace all began with in January when Walt Disney Co. took the plunge on a long-needed creative infusion by spending $7.4 billion to acquire its animation partner Pixar. The Burbank media giant turned around the next month and unloaded its ABC Radio Networks station portfolio to Los Vegas-based Citadel Broadcasting Corp. for $2.7 billion.

And in the year's biggest local deal, valued at $13.7 billion, Univision Communications Corp. patriarch A. Jerrold Perenchio cashed out in June after an auction as melodramatic as one of his Spanish-language network telenovelas. Fittingly, the year ended with a surprise when American Apparel Inc. founder Dov Charney announced he'll sell his provocative "made-in-L.A." T-shirt company to a publicly held private equity firm for a more modest $385 million. He'll still hang around to run the company.

All in all, the deals were across such a broad spectrum that even veterans of the M&A sector were surprised.

"While in the past we might have been reliant on one or two industries like entertainment and aerospace, the variety of deals we saw this year is testament to the breadth of our economy here," said Dennis McCarthy, managing director at Los Angeles investment bank B. Riley & Co.

A typical local deal for the year often involved an outside strategic partner shopping the region to pump up its own innovation.

Consider Silicon Valley consumer finance software maker Intuit Inc., which turned to the 101 Tech Corridor to enhance its transaction processing and online banking capabilities. Intuit announced deals for Camarillo's Electronic Clearing House Inc. for $142 million in late November and Calabasas' Digital Insight Corp. for $1.35 billion in mid-December.

Local buyers

Local firms large and small with healthy war chests or friendly bankers were on the prowl too. Glendale's Public Storage Inc. bought Seattle's Shurgard Storage Centers Inc. for $5 billion, the largest deal announced in March. The impetus behind that one: a desire by Public Storage to enhance its position in Europe, where Shurgard had a solid presence.

Los Angeles' C.B. Richard Ellis Group Inc., already the world's largest commercial real estate services company, capped a year of strategic buys by closing its nearly $1.8 billion acquisition of Houston rival Trammel Crow Co. last month.

Long Beach's Health Care Property Investors Inc. became the nation's largest health care-related real estate investment trust this spring by snapping up Florida competitor CNL Properties Inc. for $5.2 billion. And Beverly Hills-based Hilton Hotels Corp., which had focused on the domestic market, became the world's largest lodging company after reacquiring the hotel division of United Kingdom-based Hilton Group, which it had sold in the mid-1980s. The $5.7 billion deal once again made Hilton an international hotelier.

Other segments of L.A.'s commercial real estate industry became a hot-wired chess game as landmark office buildings changed hands almost before the ink had dried on an earlier sale. In December 2005, Chicago-based Trizec Properties Inc. and G.E. Commercial Finance Real Estate announced their $5 billion acquisition of Dick Ziman's Arden Realty Inc.--only to announce last year Trizec would be acquired by Brookfield Properties Corp. and the Blackstone Group in the second-largest takeover ever of a real estate investment trust.

Not every deal had to be a billion-dollar blockbuster to mark a company milestone. Calabasas-based health care staffing specialist On Assignment Inc., which itself was on the ropes a few years ago, celebrated its turnaround by announcing it would pay a minimum $41 million cash to acquire Vista Staffing Solutions, a Utah firm that will allow On Assignment to enter the physician-staffing market.

Private equity

Apart from strategic acquisitions, the driving force in M&A activity last year was, of course, the huge hand that private equity money played in deals nationally and locally. Villeneuve has counted 226 Los Angeles-affiliated deals with a private equity component as of mid-December, 42 percent more than in all of 2005.

Univision was sold to a group led by L.A. billionaire Haim Saban. Caledonia Investments plc and Sun International sold Atlantis resort owner Kerzner International for $4.6 billion to a group that included Los Angeles-based Colony Capital.

An affiliate of the legendary Los Angeles private equity fu-m Leonard Green & Partners LP bought Colorado-based Sports Authority Inc. January for $1.3 billion, taking the nation's largest sporting goods chain private. Later in the year, Leonard Green teamed with Texas Pacific Group to acquire San Diego-based Petco Animal Supplies Inc. for $1.8 billion.

Scott Adelson, senior managing director at Houlihan Lokey Howard & Zukin notes there's been a one-third increase nationally in deals of at least $1 billion. The increase has been largely fueled by private equity.

"The story of 2006 is that the private equity community en masse, rather on a one-off basis, started doing really large deals on a consistent basis," Adelson said. "That's here to stay for a while."

Among possible mergers, Hilton recently became the subject of speculation as an acquisition target. And look for private equity to play a big role in the fate of the Los Angeles Times, despite Tribune Co. protestations that intends to hold on to the metro daily, predicts Newport Beach author and consultant Tom Tuilli, who operates the subscriber-supported DealProfiles.com Web site.

"You have a lot of billionaires in this town--there's enough money to shake something loose, be it a single buyer or private equity," Tuilli said.