Big private companies likely to stay private.

No Industry Segment Dominates List of L.A.'s 100 Largest

L.A.'s 100 largest private companies are a wildly diverse lot, from construction to heavy industry to technology, but most of them share a common challenge: Keep growing.

Of the 72 companies for which both 1995 and 1996 revenues were released, only 13 suffered a revenue decline and four posted flat revenues. The rest posted revenue gains, although most gains were modest.

"The service sector continues to be the one creating the most jobs," said Cal State Long Beach economics department Chair Joseph Magaddino. Last year, service sector jobs rose by 4.1 percent and slightly lower rises are expected this year and next.

Magaddino pointed to businesses like temporary employment agencies and computer management companies as driving the service sector's growth.

In line with that trend, one of the bigger advances on this year's List was by Glendale-based AppleOne Temporary and Full-Time Employment Services, heading up 10 notches to No. 47. Its 1996 revenues of $247 million were up about 20 percent over 1995 revenues and are projected to reach $365 million this year.

As for computer services, Infonet Services Corp. of El Segundo is growing so fast it may not reappear on next year's List. The company, which helps companies manage their data networks, is a likely candidate for a public offering sometime soon, according to Rohit Shukla, president and chief executive of the Los Angeles Regional Technology Alliance.

"I can't see them staying private for long because they will need capital to manage the growth they need," Shukla said. "And for some strategic partnerships they might want with large aerospace companies, they may have to be a public company."

Largest Private Cos. by Industry

Diversity reflects that of the overall L.A. economy

                                 1996      1997
                                 List      List

Agriculture                         2         3
Business Services                  28(*)      8
Car Dealers                         7         9
Construction-Related Cos.          16        20
Entertainment/Media                 2         5
Food Processing                     5         6
Groceries                           4         3
Health Care                         0         2
High Technology                     8        10
Manufacturing                      17        14
Miscellaneous                       3         5
Retail                              3         3
Travel                              2         3
Wholesale/Distribution              3         9

* Includes financial institutions and advertising agencies,
which were excluded from consideration in 1997 because they
do not have revenues, in the traditional sense.

Source: Los Angeles Business Journal Research

If Infonet does go public, it would likely be one of the few large L.A. companies to do so, according to Ed Bagdasarian, managing director of Barrington Associates in Brentwood.

"The recent volatility in public markets may make it difficult for companies to access capital that way," Bagdasarian said. "So I think we'll see a continuation of the mergers and acquisitions trend (among private companies) we've seen lately, with involvement from California and out-of-state companies."

Specifically, he said, some of L.A.'s many sprawling car dealerships might be takeover targets. (There are nine auto dealership companies on the List). One possible buyer is Republic Industries Inc., which is controlled by H. Wayne Huizenga of Blockbuster Video fame. Republic is attempting to build a category-killer chain of car dealerships.

"I think a lot of their buys will be in Southern California," Bagdasarian said.

The largest company both this year and last year, Ralphs Grocery Co., is not considering a public offering, according to Chief Executive George Golleher. He does expect the company, a wholly-owned subsidiary of the Century City-based Yucaipa Cos., to add at least 12 new Southern California stores per year for an unspecified number of years.

Mergers and acquisitions specialist John Mavredakis echoed Bagdasarian's prediction that few of L.A.'s big private companies will go public in the next year.

"Before last Monday's stock drop (Oct. 27), I would have expected a number of companies going public," said Mavredakis, managing director of Houlihan Lokey Howard & Zukin in Century City. "But now I think a lot of private companies will be making acquisitions and moving up the List while some will cash out and drop off the List."

Some companies moved up as a result of other companies disappearing, such as last year's No. 5 Hughes Markets Inc., which was acquired by a Washington state grocer.

Overall, few of the 54 companies from last year's List that reappear this year moved more than a handful of notches.

The relatively minor movement among returnees does not surprise David Dale-Johnson, director of the program in real estate at USC's Marshall School of Business.

"The shakeout has occurred, and firms sliding down the scale have gone by now," he said. "Those who remain are back on track and growing with the resurgent economy."

The construction sector made up the largest component of companies on the List, at 19 percent of total revenues (see related story), followed by grocery stores (18 percent), and wholesale and distribution companies (14 percent). The number of construction firms increased to 20 from 16 a year ago, while manufacturing companies fell to 14 from 17 a year ago.

While only about half the companies from last year reappear on this year's List, the reason is not economic tumult.

Seeking to have more apples-to-apples criteria for companies included in the List, the Business Journal chose to include only companies reporting revenues. This meant the exclusion of advertising agencies (for which only billings information is generally released), financial institutions (which do not generate revenues in the traditional sense) and non-profit entities (many of which depend largely on donated monies).

Excluding such companies from consideration made room for a potpourri of new names on the bottom half of the List, from players in the resurgent aerospace/defense business like Marvin Engineering Inc. to North Hollywood-based exporter Mitake Inc.