BITE-SIZE BUSINESSES SMALL COMPANIES HAVE APPETITES FOR WORLD OF MERGERS, ACQUISITIONS.

Byline: Enrique Rivero Daily News Staff Writer

Think that the mergers and acquisitions game is just for the big boys? Guess again.

While multibillion-dollar deals grab all the headlines, mergers between small- to midsize companies - generally, those with less than $100 million in revenues and with no more than 500 employees - are quite common, according to experts.

Many smaller companies acquire other small manufacturers, equipment suppliers or other companies whose business dovetails nicely with their own. That can be an immediate boost to their revenue stream and, for publicly traded companies, an equal boost to their stock price. For some companies, it's a key to their survival because it ensures their supply sources aren't cut off, experts say.

These smaller consolidations occur ``under the radar'' and rarely are noticed by a public infatuated with mergers among the titans, said Alan Carsrud, chairman of the Center for Family and Closely-Held Businesses at The Anderson School at the University of California, Los Angeles.

Still, they're part of the wave of consolidations sweeping the country of late. And in large part, these under-the-radar mergers involve the purchase of smaller, family-owned businesses, he said.

``It's not as organized, it's certainly not as visible, but it's certainly there and we're seeing it in our manufacturing base in Southern California,'' Carsrud said.

If the public hasn't noticed, however, someone else has: Big investment banking firms, which 10 years ago didn't pay attention to the value of family-owned businesses but now fund many of the mergers.

``Now they've come to realize that a large chunk of the nation's wealth is tied up in these businesses,'' Carsrud said.

True, big companies doing the buying outnumber the smaller companies that are growing through acquisition by about 10 to 1, said John Mavredakis, a managing director at Los Angeles-based investment banking firm Houlihan Lokey Howard & Zukin.

Still, these small- to midsize companies are doing plenty of buying and finding it easier to obtain the financial backing for the transactions, he said.

``That's a growing trend,'' Mavredakis said of buying among smaller companies. ``However, it's not a dominant part of the market.''

Among some small, publicly held local companies that are growing through acquisition are Fields Aircraft Spares Inc., a Simi Valley-based supplier of commercial aircraft cabin interior parts; Matthews Studio Equipment Group, a Burbank-based supplier of lighting and other equipment for the entertainment industry and special events; and Phoenix Media Group Ltd., a Burbank producer of radio infomercials and other programming that recently embarked on an ambitious plan to buy radio stations across the nation.

Phoenix, which had some $205,000 in revenues last year, has since last month made offers or signed letters of intent to purchase AM radio stations in Missouri and Alaska and hopes to have formally acquired at least three stations this year.

The plan is to boost Phoenix's bottom line through growth, Chief Executive Officer Ron Irwin said.

``Our No. 1 major focus target is to acquire radio stations and whatever it takes to accomplish that, we'll do,'' he said. ``The overall (plan) is to enhance revenues substantially, ultimately leading to significant earnings.

``Understand, we can't guarantee anything,'' he added.

In fact, smaller companies are jumping into the consolidation game for just that reason: To increase their value through the economies of scale, said Lloyd Greif, president and chief executive officer of Los Angeles-based Greif & Co., which specializes in mergers and acquisitions for midsize companies. This is particularly true of a small public company, whose capitalization - and thus, potential buying power - is at the mercy of the stock market.

According to Greif, companies that go public often are under pressure to invest the new capital. They can do this, he said, by acquiring other companies.

Also, publicly held companies have been under pressure to boost their bottom lines so their stock prices continue to increase, he said. While this can be accomplished through internal growth, some companies take the quicker route of buying a company whose earnings can be added to its own.

``That reflects the fact that a lot of buyers are strategic buyers that are adding to their existing operations,'' Greif said.

Also, it's a matter of survival, says Carsrud. If a company doesn't purchase one of its suppliers, a rival could snap it up, thus cutting it off from its supply source, he said.

``If you don't have access to your supplier, you're going to get cut out of the loop,'' Carsrud said.

Right now it's a seller's market, Greif said. ``If you're a small public company or a small privately held company, you're in demand,'' he said. ``This is by far a seller's market, far more (than it is) a buyer's market.''

Among the types of companies most in demand right now are makers of consumer products, food service distributors, industrial manufacturers and, in particular, aerospace-related companies, Greif said.

``Aerospace is red hot - we're doing a couple of aerospace (companies) right now,'' he said.

To Carsrud, all this activity also benefits families that own so many of these smaller businesses. Many can cash in on the demand for their companies and retire quite comfortably.

And as for a potential threat to marketplace competition, Carsrud doesn't think there's anything to worry about. After all, some 700,000 new companies spring up each year in the United States, making for a steady supply of new businesses.

``When you talk about one getting eaten up by another, there's more fish growing up in the sea.''

CAPTION(S):

2 Photos, Chart

PHOTO (1--Color) Alan Fields is president of Simi Valley's Fields Aircraft Spares, a publicly held maker of interior plane cabin parts that is growing through acquisition of other small businesses.

(2) Carlos MeMattos is head of Burbank-based Matthews Studio Equipment Group, which supplies lighting for films, television and live entertainment.

Tom Mendoza/Daily News

CHART: Mini-mergers on the rise