Distressing trends.

Brentwood-based Barrington Associates, for example, has grown into perhaps the region's premier independent middle-market mergers and acquisitions advisory shop in the last 10 years. Throughout the 1990s, businesses were buying one another, and Barrington prospered.

Now, the deal business is slow. But Barrington is not firing; indeed, it needs more bodies, said Ed Bagdassarian, Barrington managing partner. "We have a group of professionals who specialize in selling distressed companies, and that business is growing quickly for us," he said.

Strategic buyers are willing to buy distressed companies, and in fact some view mergers and acquisitions as perhaps the only route to grow, Bagdassarian said.

"Yes, overall valuations are down, and the deal business is down. But the market for strategic acquisitions is still very good," he said.

A decade ago, Barrington left the distressed sale business to shops that specialized in it, such as Westside-based Chanin Capital Partners. But no more - a sign of the increasing flexibility seen in the financial world.

Another chameleon is James Montgomery, managing partner at Santa Monica-based Digital Coast Partners. A couple of years back, Montgomery talked about making Digital Coast into a leading venture shop. But venture markets died about the time Montgomery got commitments for his venture fund.

Today, many troubled tech companies need to merge with partners that have cash and staying power. Enter Montgomery and his troop of 15 bankers.

"We have about a dozen assignments now. We are getting the deals in (web-related) wireless, infrastructure and storage. We are also working in enterprise software and content delivery," Montgomery said.

Now, that strategy has become a living, as Montgomery is sought out by tech companies needing to merge - or face death.

Similarly, Century City-based Houlihan Lokey Howard & Zukin, now with 500 employees worldwide, expects business to rise in 2001 from 2000, due to heavy restructuring and cross-border merger work.

"In this market, we have actually been taking the initiative and generating deals for clients proactively," said John Mavredakis, cohead of investment banking for HLHZ.

Owners of small companies are willing to take stock in the buying company, as they feel the acquirer's stock price has come down to realistic levels. And without so much financing needed, there are fewer obstacles to a transaction getting the necessary John Hancocks on it.

To be sure, there are houses cutting back - indeed the historic name of Sutro & Co., a fixture in West Coast investment banking circles since 1858, is getting wiped out. Earlier this year, Sutro, based in both Los Angeles and San Francisco, merged with Tucker Anthony. But the combined outfit was purchased by Royal Bank of Canada in August, and merged into the bank's captive brokerage, Minneapolis-based Dam Rauscher Inc. That consolidation means layoffs in Los Angeles.

"There won't be any investment banking presence here," said Scott Wendelin, managing director with Sutro whose employment with Sutro will end this year. "Even the name Sutro will be gone."

Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. His new book is "The Pied Pipers of Wall Street: How Analysts Sell you Down the River," published by Bloomberg Press.