Consolidations Trend Expected to Continue

Orange County investment firm Cruttenden Roth is banking on the market for so-called public consolidations getting even hotter. A big trend on Wall Street the past few years, consolidations typically involve a public stock offering and a flurry of mergers and acquisitions of companies in the same industry. Since they burst on the scene a few years ago, the value of such deals shot to about $3 billion last year.

Oftentimes, companies that are combined in these consolidations are in consumer products or service-based industries. Many are family owned, and hope to benefit from professional management and access to national markets and investors. Cruttenden Roth President Byron Roth, whose Irvine-based firm has been involved in about 10 consolidations, said that the appetite for these deals has been so great that companies are now going public faster.

Among the consolidators that Cruttenden Roth has backed is Garden Grove-based Richey Electronics Inc., an electronic components distributor that is targeting other parts suppliers.

The biggest challenge posed by consolidations, Roth said, is ensuring the “culture” of an acquired business isn’t destroyed after it becomes part of a larger company. “You have to make sure you don’t lose the people you don’t want to lose,” he said. Also, he warned that Wall Street can be very unforgiving if the pace of growth doesn’t live up to expectations.

Nonetheless, he expects the trend to grow and begin encompassing other types of businesses, including manufacturers and companies that want to leverage their technology and their vendor or customer bases.

Patrice Apodaca covers economic issues for The Times. She can be reached at (714) 966-5979 and at [email protected]