Title: Managing director Company: Calabasas Capital Born: Passaic, N.J.; 1970. Education: Miami University, bachelor’s degree in accounting and master’s in tax accounting; M.B.A. from UCLA. Turning Point: “The birth of our first child (and receiving) my M.B.A. from UCLA.” Most Influential People: Warren Buffet; Gordon Gekko, a character played by Michael Douglas in the movie “Wall Street.” Personal: Lives in Marina del Rey with his wife of 15 years, two sons and two guinea pigs. Hobbies: “I grew up in Buffalo (N.Y.), so ice hockey is my favorite sport and a real passion.” David Bonrouhi sees himself as a creative risk-taker, both in the kitchen and at the office. The 45-year-old managing director of Calabasas Capital can help two struggling companies complete a successful merger during the day and then concoct a dish out of leftovers in the evening. The New Jersey native of Persian Jewish descent started his career as a tax accountant and even considered going into tax law, but his assertive disposition and adept negotiating skills – in addition to experiencing extreme boredom handling taxes – led him to a career in investment banking. After earning an M.B.A. from the UCLA Anderson School of Management, he began working at Calabasas Capital in 2009. The investment banking firm provides merger and acquisitions advisory to middle-market companies, in addition to private equity and debt capital-raising services. Though Bonrouhi said that he averages 60 to 70 hours at the office a week, he also makes an effort to accompany his two sons to hockey practice during the week and to spend time with his wife – all while juggling phone calls for work. Bonrouhi is a foodie, an outdoor enthusiast and enjoys spending days at the beach body-board surfing with his family near their Marina del Rey home. Bonrouhi met with the Business Journal at his office in Calabasas to share the ups and downs of investment banking and why he’s passionate about it. Question: How is the market for mergers and acquisitions in the San Fernando Valley? Answer: The market here is very strong right now. A lot of companies in the Valley have been acquired over the past several years by very large buyers from the East Coast, the Midwest and even Europe. ValleyCrest Landscaping is a perfect example – it’s based right here in Calabasas in our backyard. About eight years ago, they were acquired by Michael Dell’s equity group (in New York) and just two years ago they were acquired by a large landscaping company on the East Coast owned by KKR & Co. (in New York).We actually sold a company less than a year ago in the market research services industry that was based in the Valley to a Century City company. So there are many, many examples. What are the biggest problems you see in the M&A industry? Not enough integration planning. Another problem I see is not enough focus by the buyer on the human aspect of mergers and acquisitions, meaning the HR component – merging the cultures of the two companies. How about problems on the sellers’ side? Business owners that are selling have not always prepared themselves personally for selling – meaning they need to know what they’re going to do after they sell their business personally on a day-to-day basis. And whether that’s fly-fishing in Montana or playing golf every day or having a hobby of woodworking, they need to have a plan for what they’re going to do with themselves personally. Because if they don’t, it’s very difficult for them to let go. How do you get paid? Ninety-five percent, give or take, of our total compensation is contingent upon successful completion of the transaction. That is called a success fee. It is based on a certain percentage of the transaction size, and then that success fee is offset against an upfront retainer – a modest upfront retainer. That being said, we take a lot of risks in our business, so we have to pick our clients very carefully. How do you pick them? We need to make sure that our analysis of the business is in line with the owner’s expectations. Our analysis and our review of the owner’s options, whether it’s a sell or an acquisition or raising capital, needs to be in alignment with what the owner is willing to do or wants to do. For example, if an owner wants $50 million for his business but we think it’s worth $30 million, we would not pursue that opportunity. How did you get into the investment banking business? I started my career after college as a tax accountant at Price Waterhouse in New York City. My goal coming out of college was to be a tax attorney, so law school was in the plans. Most of my friends in Manhattan were investment bankers, however. I got my CPA after two years and was bored with taxes. At that time, one of my friends helped me get a job with a firm on Wall Street. That was 20 years ago. According to the Securities and Exchange Commission, you were once disciplined for one insider trade worth about $4,160. What did you learn from that experience? This relates to an issue that came up in 1998, over 17 years ago, when I was a young professional very early in my career. I’ve worked very hard over the past two decades to overcome this by working with a very high degree of integrity and servicing my clients in their best interests. How did you get from New York to Los Angeles? I moved to L.A. 16 years ago with my wife, who at the time was my fiancée. I moved here for two reasons, to go to business school at UCLA Anderson and to pursue a job in private equity for Union Bank of California. Both of those came together at the same time. What do you like about your job? I’m a deal junkie. I love the adrenaline rush of working on a deal that is getting close to a successful completion. I really enjoy working with business owners and helping them get a deal closed. My clients are really inspirational. What are some of your favorite stories about deals you have completed? One would be a sale where we were dealing with a buyer with a huge ego. He had run a public company before being hired by a private equity firm to run the company that we were selling to, so he really thought his you-know-what didn’t stink. He didn’t use an investment banker, which eventually cost him. Why is it a favorite? He was quite emotional and we were able to use this to our advantage in the negotiations. One of the primary advantages of using an investment banker is the client can separate themselves from the day-to-day intricacies of the deal process, which can be quite tumultuous at times. Any other deals? Another recent sale involved an investment banker on the buy side. Having a counterpart on the other side of the table made the process go very smoothly. This was especially critical when my client’s financial performance started to slip during the due-diligence process. We were both able to keep our respective clients focused on the significant strategic benefits and ultimately we got the deal done and both sides were very happy. How would you describe your management style? Admittedly, I’m a little tough. That said, I am very respectful and appreciative. I like to give my teammates the leeway to run with something and give them enough rope to make mistakes. I think it’s important to empower people with a sense of ownership. That’s a big motivator. Would you say you micromanage? Sometimes I do, but I try not to. What was the turning point of your career? One was the birth of our first child. Around that same time, I got my M.B.A. from UCLA, where I had taken a number of entrepreneur courses. I decided at that time that I wanted to work for myself. I was tired of working for big companies. I also wanted the flexibility to spend time with my kids. Would you say that you have that flexibility now? I do have flexibility, but I still work just as much, if not more, than I did when I worked for bigger companies. I work more at night and more on the weekends. That’s one thing I didn’t anticipate. I can go pick my sons up from school at 3 p.m. and take them to hockey practice, but then I just end up working later at night. As long as I have a phone and a computer, I’m good. How many hours do you work a week? Sixty to 70. What do you like least about your job? How many things can go wrong in a deal process that are totally outside of my control. Can you give an example? The financial performance of a company, for example, could deteriorate just by coincidence during the deal process. And if the buyer is offering a certain amount for a business and then during due diligence the financial performance of my client deteriorates significantly, the buyer will either renegotiate the price or walk away. What’s the average time it takes to close a deal? Five to six months. What qualities in your personality make you good at this job? I work very hard; I’m aggressive and persistent; I’m good at listening and I’m creative. Creativity – how does that tie into investment banking? There is not always one way to get a transaction completed. If a business owner wants liquidity, he doesn’t necessarily have to sell 100 percent of the business. He could sell a portion of the business and still control the company. Sometimes deals get sidetracked, and then you’ve got to be creative to find a different way to address the situation, to see if a deal can get done a different way. You have to be quick to adapt, to come up with different ideas and to see if you can still get it done. Looking back, was there anything in your childhood that prepared you for this career? I’d have to say my mom. My mother was a single parent with three kids at a young age. Every time I think I’m having a tough time, I think about what my mother went through. She was forced into an arranged marriage with someone she didn’t know and was divorced and on welfare with three kids at the age of 24, with no education and no family nearby to help out. She then went to college, and actually brought all three of us to class once in a while if she didn’t have anyone to watch us. She got a job in computer programming and somehow put three kids through college. So I get my drive from my mom and I get my analytical skills from her as well. What advice would you give to people thinking about a career in investment banking? Investment banking is about more than just financial analysis. It’s really a combination of financial analysis, law, accounting, business development, psychology and negotiation. Do your clients ever wonder about your qualifications, since you have never run a manufacturing or biotech or whatever company? I don’t think so. After all, clients don’t hire us to help them run their companies. They hire us to help them sell the company, buy another company or raise capital for a variety of different purposes. I often tell clients that no matter what, I’ll never know as much about their business as they do. On the other hand, I know how to get deals done. Shrewd business owners appreciate the value of outsourcing key initiatives to the right professionals with real expertise. What can other managers learn from Calabasas Capital? The less bureaucracy the better. Instill a team approach. Everyone together and individually will benefit more in the long term by working as a team and sharing the same long-term goals. What are your hobbies or pastimes? I grew up in Buffalo, (N.Y.), so ice hockey is my favorite sport and a real passion. I started when I was 8 and I still play. I also got my two boys into the game and they play competitively. When we are not at the rink, we are at the beach Boogie Boarding. We live in Marina del Rey so the beach is very close. I also love food. I tinker in the kitchen quite often. I’m somewhat of a foodie. What are you good at cooking? I’m good at making creations out of leftovers. I think I learned that in college. My kids make fun of me because I am constantly making these wacky creations out of leftovers. Is there else anything you’d like to add? It’s a very good time for business owners who are considering a sale of their business or considering raising capital. The market is red hot, valuations are higher than they’ve ever been and this frothy environment probably won’t last very much longer.
Urge to Merge
