Megadeals highlight December after M&A slowdown.

While overall deal activity in L.A. was down during the second half of 2006, the year ended with a bang as three megadeals were announced in December.

The nearly 400 deals announced during the second half of 2006 was off 6 percent from the first half of the year and 11 percent from the second half of 2005, according to figures compiled by Minneapolis, Minn.-based Goldsmith Agio Helms LLC.

"We're definitely seeing a flattening out of deal activity after peaking in late 2005 and mid-2006," said Ed Villeneuve, managing director at Goldsmith Agio Helms.

Goldsmith began tracking L.A. County deals in July 2005, so data for the first half of that year was not available. But December was a blockbuster month as two huge media deals involving L.A. players dominated the scene.

One was the announced sale of El Segundo-based satellite television provider DirecTV Group Inc. by its parent company News Corp. to Liberty Media Interactive in Englewood, CO. That deal was valued at $11.2 billion, making it the second largest L.A. deal for all of 2006, behind the $13.7 billion sale of Univision Communications Inc. to a private equity team led by Saban Capital Group.

Billionaire Haim Saban also was on the other end of a megadeal in December, selling his German satellite television company--ProSiebenSat 1 Media A.G.--for $4.5 billion to a buyout team led by Kohlberg Kravis Roberts & Co. and Permira Advisers Ltd., both of New York.

Given the high concentration of major media and entertainment companies in L.A., it's not surprising to see two such blockbuster deals in such a short time, said Ed Bagdasarian, managing director at L.A.-based Barrington Associates.

"A lot of private equity companies are being very aggressive in the media space, given all the growth and change in the industry. And Los Angeles has a high concentration of companies servicing the media and entertainment industries," he said.

The other large December deal involved the real estate and gaming sectors, where L.A.-based Colony Capital LLC announced it was acquiring Station Casinos Inc. of Las Vegas for $4.7 billion.

Yet despite these big deals, only 62 transactions involving L.A. companies were announced in December, capping a five-month lull in deal activity. Villeneuve said that the price of some acquisitions may have just gotten too rich.

"It may be that banks have reached the peak of what they're willing to lend and buyers have reached a peak of what they are willing to spend," he said.

Another reason for the lackluster number of deals may be a shortage of companies on the market.

"There are lots of buyers out there, but we're not seeing as many companies coming to market now as we did several months ago," said Bagdasarian. "It's taking (private equity funds) a while to work with new portfolio companies to grow them to a stage where they can be sold at exceptional returns."

Whether deal activity rebounds in 2007 may revolve around whether there are enough companies in the pipeline to be sold. Interest on the buyer side remains high, with several new funds raised last year as public pension funds and other institutional funds continue to pour money into private equity.

"All these funds will be out there looking for companies to buy," Bagdsarian said.

BY HOWARD FINE

Staff Reporter

December Comeback
The year finished with several big deals.

2006                Number       Value *

January             60               $16.0
February            64                 4.0
March               67                12.2
April               65                 5.9
May                 88                11.8
June                84                20.0
July                81                 4.7
August              67                 4.4
September           71                 5.0
October             63                 4.3
November            53                 6.11
December            62                21.4

* in billions

Source: Goldsmith-Agio-Helms