SunGard Data Systems

Private Equity
End term project
Amit Sharma Niraj Todi Geet Jain Sameer Goyal Vibhuti Sharma

88 per share (which was 20% premium over the current traded price of the company s share).9 Billion. provides integrated software and processing solutions and information availability services in the United States. but its biggest business is creating backup data systems in case main systems are damaged or disabled by a natural disaster. Providence Equity Partners Inc. Silver Lake Partners agreed to pay at $36 for the acquisition. blackout or terrorist attack. Goldman Sachs Capital Partners. Seven private equity firms were part of the Silver Lake Partners: Bain Capital LLC. The deal was managed by SunGard financial advisor Credit Suisse First Boston. But at the same time. SunGard operates through three segments: Investment Support Systems (ISS). and Texas Pacific Group. Inc. Earlier SunGard was planning to spin off the Company s availability services business.. SunGard claims its software manages 70 percent of the transactions made on the NASDAQ Stock Market.SunGard Data Systems SunGard Data Systems. The Blackstone Group LP. A buyout investor group led by Silver Lake Partners will take SunGard in a leveraged buyout transaction. SunGard is the financial software powerhouse known for trading services and creating backup data systems in the event of a disaster. Availability Services (AS). which makes the deal at $11. SunGard offered a final share price of $36 per share. . and Higher Education and Public Sector Systems (HEPSS). Kohlberg Kravis Roberts & Co. Silver Lake partners offered the board for an acquisition deal at an initial price of $31. After few rounds of discussions and negotiations.

000 All seven firms had strong track records and reputations.000. Total Commitment $540. Providence Equity Partners V LP TPG Partners IV.000.000 $3.Financing of the deal: The SunGard buyout was an $11.3 billion of existing cash. GS Capital Partners.000. Datek and Instinet.000. KKR Millennium Fund.5 billion while management contributed $0.P. combining investment banking and private equity investing.000 $540.1 billion of the equity Equity contribution of the 7 Private Equity Firms: Equity Investor Silver Lake Partners.000 $500. it specialized in the less competitive area of technology buyouts and had a strong track record. L.P.000 $540.000. L. Bain Capital and Texas Pacific Group had reputations for turning around underperforming companies. including Ameritrade. $0.P.000 $540. Bain Capital Fund.P. The Blackstone Group and Goldman Sachs were among the most prominent merchant banks.000 $300.000.000 $540. . While Silver Lake Partners was relatively young. L.000. and $3.000.9 billion transaction financed with $8 billion of debt ($5billion of senior secured debt and $3 billion of subordinated debt).6 billion of equity. L. Blackstone Partners. Silver Lake also had a history of investing in financial services companies.P. KKR was one of the pioneers of the leveraged buyout transaction and had engineered the LBO of RJR Nabisco.500. Seven private equity firms contributed $3. largest LBO of all time. L. L.P.

4 295.4 729.16 2009 818.7 994.25 367 314.3 1545.7 -21.85 *Refer to annexure for the debt schedule The present value of the FCFE is $21.Valuation of the deal The deal can be valued using either DCF method or using the peer evaluation method.3 20046. This discounted price can be contributed to the risk associated with the business SunGard operates in.6 282.5 -26 296. company is valued at a higher value compared to the offer by Silver Partners.6 295.8 1268 1381. Apart from the riskiness also the operating margins and the lifecycle stage of the company .3 -26 924.3 2519.6 269.58 1340.1 -20.5 -14.27 2008 753.740.7 5040.44 Based on the DCF Method.4 384.3 1646.6 834.3 Based on these projections .6 376.6 1144.28 387.57 0 529.12 M No of outstanding share are 385 M Hence the value per share is $56.69 384.3 Free Cash Flow To Equity 1082.7 1169.6 1461.46 0 529.3 8311.3 4771.6 387.4 387.5 -14.4 269.84 2175.89 3048.2 1076.15 Cash balance 611.94 387. the free cash flow to the equity is calculated 2005 544.2 880.15 Net debt* 500 Interest Payment 28.5 367 777.5 2006 2007 2008 2009 4225 4515.5 -17.14 EBIT (1-T) Depreciation CAPEX Increase in Net working capital Free cash flow to firm 611.4 -21. DCF Method The projections of the SunGard are given below: PROJECTIONS Revenues EBITDA Depreciation + Amortization EBIT Increase in Net working capital Capital expenditures 2005 3936. The Silver partners have offered price at a 36% discount.1 872.2 -20.73 7500 529.4 314.1 282.44 376.4 2006 616.1 -17.8 0 529.43 2007 695.34 3972.2 296.

6 18. Fiserv Inc.2 20. and another appealed to another P/E Multiple Method Using the peer evaluation method. which shows it is operating at an operating margin of 12. .11429 For our calculation we will use the P/E Multiple to be 20 PAT No of shares Outstanding EPS Industry Multiple Price Per Share 453. SEI Investments Co. the following can be observed regarding the competition Current P/E AS Competitors Affiliated Computer Computer Sciences Corp.62 20 32.4 20. which is reflected in the lower value of price per share.4 22 19.2 26. Electronic Data Systems Corp International Business Machines Corp.9 21.3 17.4 Using this method it shows the price offered by Silver partners is offering a premium of $4.6 15. and one type of investor.7 18.6 280 1. Bisys Group Inc.8 15. DST Systems Inc.7%. For example: in year 2004 SunGard had PAT of $454 million on revenues of $3. SunGard Mean 16.55555556 12 Month Forward P/E 14 42.5 15.2 22.1 19.9 18. ISS & HEPSS Competitors Automatic Data Processing Inc.56 billion. one appealed to one constituency. This price per share calculated using this method shows that industry is trading at a discounted P/E. Another reason for the undervaluation was it was operating in 2 businesses.also raises further questions.

3 0 2010 8000 529.3 0 2009 8000 529.3 0 2012 8000 529.8 6.02 8 Interest Value 301 200 .3 0 2011 8000 529.3 0 2013 8000 378.3 7500 2007 8000 529.3 500 2006 8000 529.3 0 2008 8000 529.8 0 2014 3000 200 -5000 Amount Interest Rate 5000 2500 500 310 3500 109.Annexure Debt Schedule Sources of funds Bank Debt (7yr & 6 mnth) High Yield Debt (12 yr) Debt assumed Cash New equity assumed Management rollover Debt Schedule Debt Interest Change in debt 2005 500 28.

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