Based in Los Angeles, CA, Houlihan Lokey (NYSE:HLI) scheduled a $300 million IPO on the NYSE with a market capitalization of $1.5 billion, at a price range midpoint of $23, for Thursday, August 13, 2015. Priced at $21, 9% below mid-range. Shares reduced to 10.5mm from 13.1mm.
Manager, Joint-managers: BofA Merrill Lynch, Goldman Sachs
Co-managers: UBS Investment Bank, Keefe, Bruyette & Woods, Houlihan Lokey, Sandler O'Neill + Partners, JMP Securities
End of lockup (180 days): Tuesday, February 9, 2016
End of 25-day quiet period: Monday, June 8, 2015
Summary
Established in 1972, HLI is a leading global independent investment bank with expertise in M&A, financings, financial restructurings and financial advisory services.
Valuation
Glossary
Accumulated deficit ($mm) | . | . | -$11 | |||
Per share dilution | . | . | -$23.38 | |||
Valuation Ratios | Mrkt. Cap ($mm) | Price /Sls | Price /Erngs | Price /BkVlue | Price /TanBV | % offered in IPO |
Houlihan Lokey | $1,500 | 2.6 | 25.0 | 21.3 | 60.5 | 20% |
Conclusion
Neutral
- Proceeds to selling shareholders
- 2.6% dividend
- Q1 rev. up 3%
- 25 P/E
- Per share dilution about the same as IPO price
To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.
Business
Established in 1972, HLI is a leading global independent investment bank with expertise in M&A, financings, financial restructurings and financial advisory services.
Through its offices in the United States, Europe, Asia and Australia, HLI serves a diverse set of clients worldwide, including corporations, financial sponsors and government agencies. The company provides its financial professionals with an integrated platform that enables them to deliver meaningful and differentiated advice to its clients.
HLI advises its clients on critical strategic and financial decisions, employing a rigorous analytical approach, coupled with deep product and industry expertise. The company markets its services through its product areas, its industry groups and its Financial Sponsors group, serving its clients in three primary business practices: Corporate Finance (encompassing M&A and capital markets advisory), Financial Restructuring (both out-of-court and in formal bankruptcy or insolvency proceedings) and Financial Advisory Services (including financial opinions and a variety of valuation and financial consulting services).
As of June 30, 2015, HLI had a team of 695 financial professionals across 17 offices globally and an additional three offices through its joint ventures, serving approximately 800 clients annually over the past several years, ranging from closely held companies to Fortune Global 500 corporations.
Leader in transactions under $5 billion
HLI's Corporate Finance group is the leading M&A and capital markets advisor for mid-cap transactions. The company was ranked the #1 M&A advisor for United States transactions under $5 billion in 2014, and it has been the #1 M&A advisor for United States mid-cap transactions every year for the last nine years (2006-2014).
HLI also has one of the largest, most experienced restructuring practices globally, having advised on more than 1,000 restructuring transactions, including 12 of the 15 largest United States bankruptcies, since 2000.
In 2014, HLI was ranked as the #1 global financial restructuring advisor, and in 2013, it was recognized as the Global Restructuring Advisor of the Year by the IFR and European Restructuring House of the Year by Financial News, in addition to receiving recognition for its roles on seminal and complex United States and cross-border M&A transactions in 2013 and 2014. Finally, the company is a respected market leader in Financial Advisory Services, as it has been ranked as the #1 U.S. M&A fairness opinions advisor over the past ten years.
HLI remains independent and specialized, focusing on advisory products and market segments where its expertise is both differentiating and less subject to conflicts of interest arising from non-advisory services, and where HLI believes it can be a market leader in a particular segment. The company does not lend or engage in any securities sales and trading operations or research which might conflict with its clients' interests.
Intellectual property
HLI's trademarks, trade names and service marks, such as "HL," "Houlihan Lokey" and "Houlihan Lokey Howard & Zukin," which are protected under applicable intellectual property laws and are its property.
Competition
HLI believes its primary competitors vary by product and industry expertise, and would include the following: for its Corporate Finance practice - Harris Williams & Co., Jefferies LLC, Lazard Ltd., Moelis & Company (MC), N M Rothschild & Sons Limited, Piper Jaffray Companies (PJC), Robert W. Baird & Co. Incorporated, William Blair & Company, LLC and the bulge-bracket investment banking firms; for HLI's Financial Restructuring practice - The Blackstone Group L.P. (BX), Lazard Ltd. (LAZ), Moelis & Company and N M Rothschild & Sons Limited; and for HLI's Financial Advisory Services practice - Duff & Phelps Corp. and the "Big Four" accounting firms.
5% shareholders pre-IPO
- ORIX USA - 47.9%
- HL Voting Trust - 47.0%
- Scott L. Beiser - 47.0%
- Irwin N. Gold - 47.0%
- Robert H. Hotz - 47.0%
Dividends
HLI intends to pay a quarterly cash dividend initially equal to $0.15 per share of its common stock, commencing with the third quarter of fiscal 2016. Any declaration and payment of future dividends to holders of the company's common stock will be at the discretion of its board of directors and will depend on many factors, including its financial condition, earnings, cash flows, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends and other considerations that its board of directors deems relevant. Under the New Revolving Credit Facility and the New Note, HLI will be restricted from paying cash dividends in certain circumstances, and the company expects these restrictions to continue in the future.
Use of proceeds
All of the shares of Class A common stock offered are being sold by the selling stockholders, ORIX USA and certain of the HL Holders. HLI will not receive any of the proceeds from the sale of shares of Class A common stock by the selling stockholders in this offering, including from any exercise by the underwriters of their option to purchase additional shares of Class A common stock.
Disclaimer: This HLI IPO report is based on a reading and analysis of HLI's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.
