What are B Riley Financial Inc's Business Segments?
B. Riley
Investment Banking and Corporate Finance
B. Riley investment banking professionals provide equity and debt capital raising,
merger and acquisition and financial advisory services to both private and publicly
traded companies. Those services include: follow-on public offerings, debt and
equity private placements, debt refinancings, corporate debt and equity security
repurchases, and buy-side and sell-side representation, divestitures/carveouts,
leveraged buyouts, management buyouts, strategic alternatives reviews, fairness
opinions, valuations, return-of-capital advisory, hostile/activist advisory, and
options trading programs.
Sales, Trading and Corporate Services
Our sales and trading professionals distribute B. Riley proprietary research products
to our institutional investor clients and high net worth individuals. B. Riley
sales and trading also sells the securities of companies in which B. Riley acts
as an underwriter and executes equity trades on behalf of clients. We maintain
active trading relationships with substantially all major institutional money
managers. Our equity and fixed income traders make markets in approximately 150
securities. Our corporate services include retail orders, block trades, Rule 144
transactions, cashless exercise of options, and corporate equity repurchase programs.
Equity Research
Our equity research is focused on fundamentals-based research. Our research focuses
on an in-depth analysis of earnings, cash flow trends, balance sheet strength,
industry outlook, and strength of management that involves extensive meetings
with key management, competitors, channel partners and customers. We provide research
on all sizes of firms; however, our research primarily focuses on small and mid-cap
stocks that are under-followed by Wall Street. Our analysts regularly communicate
their findings through Research Updates and daily Morning Notes.
Our research department includes research analysts maintaining coverage on a variety
of companies in a variety of industry sectors. Our research department annually
organizes non-deal road shows for issuers in our targeted industries. To provide
our institutional clients access to management teams of companies in our coverage
universe and others, our research department has held 16 consecutive annual institutional
investor conferences.
Capital Management
We provide investment management services under our subsidiary, B. Riley Capital
Management, LLC, an SEC registered investment advisor. The registered investment
advisor manages one mutual fund and certain other private investment funds, including
a fund of funds. All of the funds managed typically invest in both public and
private equity and debt. Investors for the various funds include institutional,
high net worth, and individual investors. GACP is the general partner of GACP
I, L.P., a direct lending fund that provides asset based loans to middle market
companies.
Wealth Management
In February 2015, we acquired MK Capital, a wealth management business with operations
primarily in New York, and subsequently changed the name to “B. Riley Wealth
Management”. Our wealth management business provides comprehensive investment
advisory services to ultrahigh net worth families and individuals. We provide
traditional asset management, alternative asset management and trust and estate
planning to our clients. B. Riley Wealth Management is a division of B. Riley
Capital Management, LLC, an SEC registered investment advisor.
Proprietary Trading
We engage in trading activities for strategic investment purposes (i.e proprietary
trading) utilizing the firm’s capital. Proprietary trading activities include
investments in public and private stock and debt securities. In 2010, the federal
government passed the Dodd-Frank Wall Street Reform and Consumer Protection Act
(“Dodd-Frank”). Dodd-Frank significantly restructures and intensifies
regulation in the financial services industry and includes a section referred
to as the “Volcker Rule”. The Volcker Rule provides for a limitation
on proprietary trading and investments by certain bank holding companies. We are
not a bank holding company and, as a result, the limitations applicable to bank
holding companies regarding proprietary trading and investment in the Volcker
Rule do not apply to us.
The business described above for B. Riley is reported in our capital markets segment
for financial reporting purposes.
Great American Group
Retail Store Liquidations
We enable our clients to quickly and efficiently dispose of under-performing assets
and generate cash from excess inventory by conducting or assisting in retail store
closings, going out of business sales, bankruptcy sales and fixture sales. With
the goal of providing a single-source solution to our retail clients, we also
provide merger and acquisition due diligence through our auction and liquidation
segment and reverse logistics and appraisal services through our valuation and
appraisal segment. Financial institution and other capital providers rely on us
to maximize recovery rates in distressed asset sales and in retail bankruptcy
situations. Additionally, healthy, mature retailers utilize our proven inventory
management and strategic disposition solutions, relying on our extensive network
of retail professionals, to close unproductive stores and dispose of surplus inventory
and fixtures as existing stores are updated. For example, in a potential bankruptcy
engagement, the debtor provides potential disposition firms with a snapshot of
inventory and other assets available for sale. The disposition firms must analyze
the inventory data and generate an estimate of potential recovery based on their
valuation expertise and past liquidation experience. The disposition firms then
submit bids that guarantee a minimum recovery based on a percentage of retail
value or cost. The successful bidder assumes management of the debtor’s
stores on a contract basis and conducts the orderly disposition of the inventory
and assets in these stores. Profits are generated by efficiently merchandizing
inventory, managing the orderly closing of store locations and pricing remaining
products to balance margin with speed of sale and liquidation expenses. Unlike
merchandisers who employ a “top down” approach by focusing only on
driving total sales (because overhead costs are fixed), disposition firms take
a “bottom up” approach by focusing on balancing cost savings with
maximizing proceeds. A typical retail disposition process spans eight to twelve
weeks from the bankruptcy court’s approval of the successful bid to the
final store closure.
We often conduct large retail liquidations that entail significant capital requirements
through collaborative arrangements with other liquidators. By entering into an
agreement with one or more collaborators, we are able to bid on larger engagements
that we couldn’t conduct on our own due to the significant capital outlay
involved, number of independent contractors required or financial risk associated
with the particular engagement. We act as the lead partner in many of the collaborative
arrangements that we enter into, meaning that we have primary responsibility for
the due diligence, contract negotiation and execution of the engagement.
Wholesale and Industrial Asset Dispositions
We design and implement customized disposition programs for our clients seeking
to convert excess wholesale and industrial inventory and operational assets into
capital. We dispose of a wide array of assets including, among others, equipment
related to transportation, heavy mobile construction, energy exploration and services,
metal fabrication, food processing, semiconductor fabrication, and distribution
services. We manage projects of all sizes and scopes across a variety of asset
categories. We believe that our databases of information regarding potential buyers
that we have collected from past transactions and engagements, our nationwide
name recognition and experience with alternative distribution channels allow us
to provide superior wholesale and industrial disposition services.
We offer clients various wholesale and industrial disposition strategies including,
among others, live auctions, webcast auctions, and online auctions. The live public
auction is the most traditional sales technique for wholesale and industrial asset
dispositions and one of our most frequently utilized services. In live auctions,
bidders gather at a specified date and time to competitively bid against one another,
with each item selling to the highest bidder. We believe that our auctioneers
are recognized throughout the industry for their auctioneering skills, project
experience, engaging personalities and ability to extract top prices. Our live
auctions can cover single sites or multiple locations, and we utilize point-of-sale
software to generate customized sales reports and invoices and to track assets.
Increasingly, we have been webcasting our live auctions over the Internet. This
auction format allows online bidders to compete in real time against bidders at
the live auction. Bidders can log onto the auction from personal computers, view
and bid on lots as they come up for sale, hear the auctioneers as the sale is
being conducted and, in some cases, view live streaming video of the auctioneer
calling the bids on-site. We believe that this auction format maximizes proceeds
by providing access to otherwise unavailable potential bidders, including international
participants, thereby increasing competition. In some cases, particularly when
assets are located in remote areas that are not easily accessible to bidders,
we may determine, in consultation with the client, that a webcast only auction
is the most appropriate format. In the online auction format, the sale of assets
takes place exclusively online, without a live auctioneer calling the sale. Similar
to the timed auctions popularized by online auction sites such as eBay, assets
are posted for sale online and buyers can bid on lots and items for a set period
of time, usually one week. The online auction format is optimal for clients that
have idle assets in quantities insufficient to justify the cost of a live auction.
We conduct our wholesale and industrial disposition business throughout parts
of North America, Europe, Asia and Australia. Our business is primarily conducted
through GA Global Partners, LLC, a 50% owned subsidiary that is controlled by
us.
Great American Group provides the foregoing services to clients on a guarantee,
fee or outright purchase basis.
Guarantee. When providing services on a guarantee basis, we guarantee the client
a specific recovery often expressed as a percentage of retail inventory value
or wholesale inventory cost or, in the case of machinery or equipment, a set dollar
amount. This guarantee is often required to be supported by a letter of credit,
a cash deposit or a combination thereof. Cash deposits are typically funded in
part with available cash together with short term borrowings under our credit
facilities. Often when we provide auction or liquidation services on a guarantee
basis, we do so through a collaborative arrangement with other service providers.
In this situation, each collaborator agrees to provide a certain percentage of
the guaranteed amount to the client through a combination of letters of credit,
cash and financing. If we are engaged individually, we receive 100% of the net
profit, less debt financing fees, sale related expenses (if any) and any share
of the profits due to the client as a result of any profit sharing arrangement
entered into based on a pre-negotiated formula. If the engagement was conducted
through a collaborative arrangement, the profits or losses are divided among us
and our partner or partners as set forth in the agreement governing the collaborative
arrangement. If the net sales proceeds after expenses are less than the guarantee,
we, together with our partners if the engagement was conducted through a collaborative
arrangement, are responsible for the shortfall and will recognize a loss on the
engagement.
Fee. When we provide services on a fee basis, clients pay a pre-negotiated flat
fee for the services provided, a percentage of asset sales generated or a combination
of both.
Outright Purchase. When providing services on an outright purchase basis, we purchase
the assets from the client and typically sell them at auction, orderly liquidation,
through a third-party broker or, less frequently, as augmented inventory in conjunction
with another liquidation that we are conducting. In an outright purchase, we take,
together with any collaboration partners, title to the assets and absorb the profit
or loss associated with the asset disposition.
The retail store liquidations and wholesale and industrial asset dispositions
business of Great American Group described above is reported in our auction and
liquidation segment for financial reporting purposes.
Valuation and Appraisal
Our valuation and appraisal teams provide independent appraisals to financial
institutions, lenders, private equity firms and other providers of capital for
estimated liquidation values of assets. These teams include experts specializing
in particular industry niches and asset classes. We provide valuation and appraisal
services across five general categories:
Consumer and Retail Inventory. Representative types of appraisals and valuations
include inventory of specialty apparel retailers, department stores, jewelry retailers,
sporting goods retailers, mass and discount merchants, home furnishing retailers
and footwear retailers.
Wholesale and Industrial Inventory. Representative types of appraisals and valuations
include inventory held by manufacturers or distributors of automotive parts, chemicals,
food and beverage products, wine and spirits, building and construction products,
industrial products, metals, paper and packaging.
Machinery and Equipment. Representative types of asset appraisals and valuations
include a broad range of equipment utilized in manufacturing, construction, transportation
and healthcare.
Intangible Assets. Representative types of asset appraisals and valuations include
intellectual property, goodwill, brands, logos, trademarks and customer lists.
Real Estate. Representative types of asset appraisals and valuations include owned
and leased manufacturing and distribution facilities, retail locations and corporate
offices. We do not perform appraisals of residential properties.
We provide valuation and appraisal services on a pre-negotiated flat fee basis.
The valuation and appraisal services business of Great American Group described
above is reported in our valuation and appraisal segment for financial reporting
purposes.
UK Retail Stores
We previously had an additional operating segment relating to UK retail stores.
Our UK retail stores segment included the operations of ten retail footwear stores
in the United Kingdom as a result of our investment in Shoon Trading Limited (“Shoon”)
on May 4, 2012. We ceased to consider this a separate operating segment in August
2013 following the amendment and restatement of a shareholders agreement for Shoon
which eliminated our control rights.
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