Sponsors Draw a Line in the Sand
May 18, 2010
Last week, the deal market had a case of deja vu, as a PE consortium chased after Fidelity National Information Services. Assuming the reports are true, Blackstone had enlisted TPG Capital and Thomas H. Lee Partners to make a run at the payment processor, prepared to pay as much as $15 billion.
You could almost hear Jake, from the Blues Brothers -- "We'll put the band back together; do a few gigs, we get some bread. Bang! Five thousand bucks."
For a moment, the buyout market was back. Yesterday, however, reality finally hit, as the deal fell apart amid a disagreement over price. Fidelity's board, reportedly, wasn't satisfied with a bid valued at 10x estimated 2010 Ebitda. According to a story from Reuters, the lenders held steady, the equity drew a line in the sand and the deal unraveled as a result.
This shouldn't be taken as a sign of weakness for the PE market. That the buyers were actively pursuing mega deals speaks to the growing optimism, while the restraint underscores that participants aren't so eager to repeat past mistakes.
Who knows whether or not the sponsors would have moved forward had the lenders caved. For now, though, it's somewhat comforting that buyers are actually walking away when their walk-away price is met.
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