E-MARRIAGE Counselor.

Internet financial adviser Debbie Simon assists Companies in finding their perfect mate

A demolition derby is well underway in dot-corn land, and the carnage is no longer limited to content providers and e-commerce outfits.

Business-to-business Internet startups are starting to hit the wall, as well. They're burning through cash like high-octane fuel, and with venture capitalists becoming a lot pickier, and the window for initial public offerings slammed shut, many more cyber outfits are headed for a high-tech pileup.

That's where Debbie Simon steps in.

Simon heads the Internet practice for the Los Angeles-based investment banking firm of Houlihan Lokey Howard & Zukin. It's her job to help untangle the wreckage.

A former banker at Bear Stearns & Co. Inc. in New York, Simon serves as a financial advisor to Internet and technology companies, assisting them with mergers and acquisitions, finding strategic partners or making a graceful exit from business.

Given the woes in the Internet world, Simon has been a very busy person.

"I haven't been home before midnight in a long time," she says.

Question: We've seen content and e-commerce sites hit the wall. What's in store for other dot-corns?

Answer: If you look at it from the bird's eye view, what we've seen is multiple cycles. The first companies out of the box were really your community and content sites. The money flowed in, there was a lot of euphoria and valuations soared. Then there was a shakeout and consolidation, and you saw valuations come tumbling down. Then the e-tailers came along, and the same thing happened. Now it's the B2Bs. I think what we're seeing and will continue to see are these rolling cycles.

Q: How tough is it for a dot-coin to attract capital these days?

A: There used to be a clear path. You used to have your angel money, and then you'd get your first round of funding, then your second round. You'd get a mezzanine level and, voila, you could go public. And that path is no longer viable for many companies. A lot of companies are facing fewer options today in terms of accessing additional liquidity. If you look at the second and third quarters of 2000, there were 106 and 56 (planned) IPOs withdrawn, respectively. That's a pretty tough market in my opinion.

Q: So a lot of these dot-corns are in a pretty dire position?

A: Right. I think underwriters are a lot more selective about the kinds of companies they will take out. The market is extremely selective about the kinds of companies it'll invest in.

Q: So is that where you step in?

A: We've been very active in finding strategic partners for Internet and technology companies. A partner can bring additional financial and strategic resources, maybe help diversify (a dot-com's) product line. We're also working with companies to find an exit solution. We've been very, very active in terms of issuing fairness opinions (to establish a fair value for companies that are being sold or liquidated).

Q: What does a dot-corn need to have going for it to attract a buyer these days?

A: The companies that are exciting to a potential buyer are companies that have some exciting proprietary technology. They're companies that have a product that might diversify a buyer's product line. It is a company that may be able to provide a buyer with a way of operating cheaper, lowering customer acquisition costs. It may be a customer base that has excellent demographics and is very loyal. It could be the management team or certain employees that are valuable to a buyer.

Q: Are there many interested buyers?

A: We're quite busy. There's a tremendous amount of strategic M&A deals going on right now. The market has definitely not dried up in that area. Valuations may be more realistic today, but activity is still at very strong levels.

Q: What's the atmosphere like at the companies you're dealing with?

A: It really depends on the stage they're in. If they have the wherewithal to make it to break-even, then it is still positive. The Internet space is still very strong. This is a medium that's not going away. What we're seeing now is a reality check. The fundamentals are still strong but the valuations have gotten out of line.

Q: Are the dot-coms getting religion in terms of business discipline?

A: The word profitability has entered their vocabulary, and it warms our hearts to see that. They're thinking, "You know what? We better hunker down and start focusing more on our business model, on achieving profitability." The money spigot has been turned off for now, so they're focusing on making due with what they've got.

Q: How has the internal culture changed at these companies? Are the young hipsters making way for the button-down professionals?

A: I think what we are seeing is the attempt to bring in more-seasoned management. It used to be the emphasis within s company was on the technology team and the sales and marketing team. So there was not as much attention paid to laying the foundation correctly from a financial and accounting perspective. I still see the faces of 20-year-olds all the way up to more-seasoned management. But even the 20-year-olds have gained years of experience in a short period of time.

Q: So how do you see this playing out in the months to come?

A: I wish I had a crystal ball. In terms of the next few months, I don't think you're going to see a tremendous amount of change. I don't think the IPO window is going to miraculously open up for many of these companies. I think investors are still going to be focused on profitability. And given all the recent earnings warnings, I don't see a significant increase in valuations.

Debbie A. Simon

Title: Vice President

Company: Houlihan Lokey Howard & Zukin

Born: Los Angeles 

Education: Bachelor's degree in economics, UC Berkeley; MBA with an emphasis in accounting and finance, UCLA 

Most Admired People: Her father and mother

Personal: Single