LVL Set To Go Public

MacKenzie Shea Advising Reorganization

SAN FRANCISCO–After months of searching for a buyer or investor, financially strapped LVL Communications has decided to go public next month.
Cal Lai, LVL’s chief executive officer, confirmed the plan last week. “This is a way for us to grow and attract the kind of consumer technology clients that need our expertise,” he said.
The Palo Alto, Calif.-based advertising and interactive agency has been working with San Francisco investment bankers MacKenzie Shea to reorganize management, negotiate with creditors and raise capital in preparation for the deal.
Tom Schultz, a principal with 3-year-old MacKenzie Shea, began serving as interim chief financial officer about six months ago at the shop, which has about 50 employees and an estimated $8 million in revenue.
The buyout firm expects to infuse $1.5-2 million into the agency by the first quarter of 1998 and merge LVL with a publicly owned “shell company,” Schultz said. Shell companies are corporations without assets or operations, generally formed to obtain financing.
The new capital will be used to attract and retain key staff in the tight Silicon Valley labor market, where employees often demand equity in the company as part of their compensation, Lai said.
The agency is also offering creditors–primarily media companies such as Ziff-Davis–shares in the soon-to-be-public agency as payment for outstanding debts.
Since Schultz came on board, five midlevel agency managers have resigned or been laid off and have not been replaced, sources said. Earlier this year, two public companies, CKS Group in Cupertino, Calif., and Think New Ideas in New York and Los Angeles, held separate talks to buy LVL, sources said.