Brokerage B. Riley to Acquire Boutique Bank

Los Angeles brokerage B. Riley & Co., which specializes in providing institutional investors with research on small public firms, said Wednesday that it would acquire Friend & Co., a boutique investment bank in Irvine that raises money and handles mergers for the same segment of companies.

B. Riley Chairman Bryant Riley said Friend’s 10 employees would work from Orange County, bringing B. Riley’s workforce to nearly 50 people. Terms of the deal weren’t disclosed.

The combination is a small piece of a large realignment of California investment firms in the post-dot-com era. Job cuts and the disappearance of firms such as Robertson Stephens Inc., a San Francisco investment bank that closed last year, have sent research analysts and deal makers scurrying to join the few companies that are expanding.

Friend’s chairman, Gregory E. Presson, said the contraction in West Coast investment banking left his firm “positioned to fill this significant void in the small- to mid-cap market.”

Friend shut down its brokerage operations last year. Ten of its former institutional sales and trading employees were hired by San Francisco-based Merriman Curhan Ford & Co. to open an Irvine office. Merriman’s chairman, D. Jonathan Merriman, said he tried to buy the entire firm, then known as L.H. Friend, Weinress, Frankson & Presson, “but we couldn’t come together on a price.”

Combining with an investment bank means Riley must pass up a chance to earn some of the $432.5 million that major Wall Street firms are providing to fund independent research for investors. The money is part of a $1.4-billion settlement of charges that the big firms’ analysts had acted more as agents for their banking operations than as providers of objective research.

B. Riley, by contrast, has been “the classic definition of independent research,” said Gordon McBean, director of research for Roth Capital Partners in Newport Beach.

Riley said he decided against joining the hordes of firms rushing to cash in on the settlement. “I don’t want to try to make a business plan out of writing independent research reports for Merrill Lynch,” he said.