Advisor Was One of Few in Loop About Sale of Times.

IAN Pereira, managing director with Morgan Stanley Dean Witter, was one of the few people in L.A. who had any inkling that a merger of Times Mirror Corp. and Tribune Co. was in the works.

But even Pereira was mildly surprised when the Chandler family trusts finally decided to sell Times Mirror, parent of the Los Angeles Times.

"We were brought in a few weeks before the deal," Pereira said. "We were told there had been some discussions with the Tribune (and were asked), 'Can you come and talk to us about what is going on in the newspaper environment in general, and what a combination might look like?"'

As requested, Pereira assembled an investment banking team, including Jonathan Knee -- a media specialist -- and Neil Morganbesser from Morgan Stanley. He also brought along Bob Denham, partner with the downtown law firm Munger Tolles & Olson.

Pereira declined to talk much about the Chandlers, except to say "current income is very important to them."

Pereira also played a role in negotiating the sales price of Times Mirror. The $6 billion deal represented a doubling of the pre-merger value of Times Mirror stock -- a whopping jump, as most mergers of publicly held companies result in a 20 percent to 40 percent premium, according to data collected by Century City-based Mergerstat, an arm of Houlihan Lokey Howard & Zukin.

Morgan Stanley has had a long relationship with Times Mirror, extending back several decades. Pereira confirmed that Tom Unterman, partner at TMCT Ventures, a firm he set up last fall at the behest of the Chandlers, played a lead role in advising family members about the sale to Tribune.

Quick $100 Million

Last July, Steve DesJardins and Joe Reece, former investment bankers with Donaldson Lufkin & Jenrette Securities Corp. in Los Angeles, started Encore Venture Partners in Santa Monica with $50 million.

Since then, they have made nine investments and last week announced the raising of another $100 million -- in one gusher -- from publicly held D.R. Horton Inc. in Dallas, the third-largest homebuilder in the United States.

A new office will open in Dallas, to be manned by Richard Beckwitt, new Encore partner and former president of D.R. Horton.

Encore Venture Partners and D.R. Horton are both backers of the Raleigh, N.C.-based BuildNet.com, which filed to go public last week. The Web site is devoted to linking residential and commercial builders to suppliers and contractors to expedite construction using the most effective, timely or lowest-cost sources.

"For the last 70 years, this has been done via a local network of contractors and suppliers organized over the telephone," said DesJardins. "The Web is a better way to do that."

But homebuilders, despite some pretty good years of late, have lollygagged on Wall Street, as investors chase hot tech stocks or blue chips with better growth stories.

Los Angeles-based Kaufman & Broad Home Corp., for example, was trading last week in the $20-a-share range, down from $35 in 1998, despite good growth in earnings and revenue over the past four years. It is selling at under six times earnings.

So getting a Web angle to attract the attention of Wall Street might make sense for D.R. Horton.

In any event, with the fresh $100 million in hand, DesJardins and Reece have their sights set on raising yet another centimillion in capital to flesh out their fund and soon will open an office in New York City, said DesJardins.

Snooping

It seems like everybody is starting venture capital funds and trying to hop on the Internet and biotech bandwagons.

But investors don't always know who they're throwing money at, warns Marianne O'Keefe, senior vice president with the Calabasas offices of Bishops, the nation's largest privately owned investigative service.

"A lot of time, an investor thinks he knows a guy because he went to college with him or something like that," says O'Keefe, a former CIA investigator. "But that could have been 15 years ago. You don't know what he has been doing since."

Not surprisingly, O'Keefe's phone has been ringing a lot in the past 18 months, as venture capitalists try to decide who to bet on -- or maybe even learn more about the folks they already have bet on.

"We have several investigations going on at any time," O'Keefe said.

Typically, O'Keefe starts with an extensive search of public records, particularly in the court system, in places where the research "target" has lived or worked.

Regulatory agencies with relevant jurisdiction get the door-knock as well. Property records get riffled, and financial problems -- such as bankruptcies or court-imposed liens from creditors -- are unearthed along with any criminal wrongdoing.

"Anything to show a guy doesn't honor his obligations," O'Keefe explained.

Additionally, references are checked and efforts made to contact other people who know the target. "If somebody isn't listing a former employer as a reference, we want to know why," said O'Keefe.

Most times, the search has benign results because Bishops is called in after the investors have done a lot of homework on their own.

But about one in 10 times, "we uncover that an entrepreneur has a background a lot more interesting than anybody knew," said O'Keefe, who recently worked on a case in which the target turned out to have a battery complaint filed against him by a spouse.

"That might indicate a volatile personality," O'Keefe said. "Not someone you want running a company."

Sometimes, negative information isn't enough to scuttle a deal entirely, especially when investors are crazy about a business plan. But an investigation can alter the structure of the deal.

"The entrepreneur, instead of being CEO and president, becomes a board director," O'Keefe said, describing one possible scenario.

In other words, the target won't be signing any checks.

Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal.