Houlihan Lokey’s Scaled-Back IPO Delivers Gain in Debut

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Houlihan Lokey IPO Means More Exposure to Clients: CEO

One deal that didn’t turn out so well for investment bank Houlihan Lokey Inc.: its own initial public offering.

The IPO, which served as a payout for current investors, generated $220.5 million in proceeds, or at least 30 percent less than the price originally marketed. The smaller deal helped Houlihan shares get a boost on their first day of trading, and they climbed 6.7 percent to $22.40 in New York.

Since Aug. 3, when Houlihan Lokey began marketing the sale, the broader U.S. market slipped and investment banking peer Moelis & Co. declined 2.4 percent through yesterday. Investors can be hesitant to devote funds to IPOs that don’t generate cash to be reinvested in the company. All of the proceeds of this IPO will go to Orix Corp., the Japanese financial-services firm that purchased Houlihan in 2007, and the firm’s executives and employees.

“It’s always a little embarrassing for a company when they have to cut the price in order to get the deal done,” Jay Ritter, a professor of finance at the University of Florida, said in a phone interview. “For public market investors, the more conservative valuation makes this more attractive.”

Houlihan is an advisory firm for many phases of a company’s life, from mergers and acquisitions to bankruptcy. Employing almost 700 financial professionals, Houlihan has worked on deals such as Priceline Group Inc.’s purchase of Kayak Software Corp. and Lehman Brothers Holdings Inc.’s restructuring.

Current investors sold 10.5 million shares for $21 apiece, according to a statement Wednesday, after offering 13.1 million for $22 to $24 each. The firm won’t receive any proceeds from the IPO. The stock is listed on the New York Stock Exchange under the symbol HLI.

M&A Expansion

Houlihan has been expanding its M&A practice to capitalize on a boom in deals, agreeing to acquire at least five companies since 2012 to advise entertainment, retail and financial firms. It’s also hired dealmakers including Stephan Hartman, former banker at Apollo Global Management, to join the M&A group in New York.

Houlihan posted $681 million in revenue in the year through March 31, a 15 percent jump from 2014, regulatory filings show. Net income attributable to Houlihan was $79.9 million during the 2015 fiscal year.

“Our business was made to go public,” Chief Executive Officer Scott Beiser said in an interview, adding that his company had a diverse ownership base before the IPO.“This will help us further brand.’

Bank of America Corp. and Goldman Sachs Group Inc. managed the IPO.

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