A handful of notable deals point to a positive trend in leveraged buyouts (LBOs) of companies in the IT channel. It started with the Dell (NSDQ:Dell ) deal, the largest IT leveraged buyout ever at $24.8 billion, which was announced in February 2013.
The Dell buyout was unique both for its size and the participation of founder Michael Dell, but it was hardly the only transaction that occurred this year. According to Capital IQ, in June 2013 leveraged buyouts were at the highest levels in more than a year. And so were valuations.
Capital IQ tracked a total of 79 U.S. LBO deals during that month and found that purchasers valued the targets at an average 21.4 times trailing 12-month EBITDA. That was more than double LBO valuations in May 2013 and the highest average multiple since April 2012.
In addition to buyouts of IT channel companies, a handful of significant solution providers also were acquired via leveraged buyouts at premium valuations this year. In April, Birch Hill Equity Partners acquired Canadian IT services company Softchoice for $420 million (a 24 percent cash-adjusted premium to the stock's closing price on the day of the announcement) and Thomas H. Lee Partners acquired IT services company CompuCom. Financial details were not disclosed, but a sale price of $1.1 billion was reported.
In addition, Thoma Bravo also said in June that it would acquire Keynote Systems for approximately $395 million and Intuit's Financial Services Division for $1.025 billion.
In an article yesterday in CRN, Marty Wolf, president and founder of martinwolf | M&A Advisors, delves into the story behind the story of these higher LBO valuations - and how IT channel companies and solution providers can increase their appeal to private equity investors - or, for that matter, any potential buyer.
Hint: it's all about future value, not past performance.
To read the entire article, click here.