The Wall Street Journal-20080115-Deal Journal - Breaking Insight From WSJ-com
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Deal Journal / Breaking Insight From WSJ.com
LBO New Wave:
Show the Cash
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Bain's 'Unleveraged' Bid
For Bright Horizons
Marks Reaction to Crunch
Deal makers aren't giving deal commentators much to work with these days, so we turn our attention to a deal that would have barely crossed the radar just a handful of months ago.
Bain Capital's agreement to buy Bright Horizons Family Solutions is, after all, the biggest U.S. private-equity deal in nearly three months, according to Thomson Financial. The merger agreement also contains a few reminders that private-equity deals ain't what they used to be.
Take the cash Bain is putting into the deal. At $640 million, it amounts to nearly half of the $1.3 billion purchase price. That is a far cry from the terms of deals struck in the go-go days. In the buyout of Harrah's Entertainment, for example, TPG and Apollo Management, which are about to close the roughly $17 billion casino deal, are putting up just $6 billion, or a little more than a third of the price. It also seems to follow a new template for Bain. The Boston firm's September agreement to buy communications-gear maker 3Com calls for more than half of the purchase price to come from owners' equity.
In some respects, deal-making hasn't changed all that much since easy credit disappeared last summer. Goldman Sachs Group, which advised Bright Horizons' board, is providing the $850 million of debt financing for the deal, reminiscent of the stapled-financing agreements that proliferated in the LBO boom.
The deal doesn't contain a "financing condition," as the company takes pains to point out in its news release. That would have given Bain an escape hatch if Goldman balked at putting up its end. Many deal watchers had predicted that financing conditions would come back into vogue given how badly banks have gotten burned on agreements to fund megabuyouts when the going was still good.
The jury is still out on whether financing conditions and other, more-sober deal terms will return in force, as a $1.3 billion buyout does not a trend make.
-- Dana Cimilluca
Will Hedge Funds
Buy Themselves?
For those of us still trying to get our minds around stock exchanges that trade publicly -- on themselves -- here is another mind-bender: an activist hedge fund agitating for change at another hedge fund.
We can't help but wonder if that is what the future may hold some day after reading about the stake of more than 9% in Och-Ziff Capital Management taken by United Kingdom hedge-fund giant Lansdowne. The announcement comes after the less-than-stellar IPO of Daniel Och's hedge fund, with the shares down more than 20% since the November debut.
Unlike other U.K. funds, such as Children's Investment Fund, Lansdowne isn't particularly known for activism. Nevertheless, the investment raises the specter of a hedge fund agitating for change at one of its own breed, rather than the corporations they typically target.
Should such a development ever occur, there is, we trust, at least one group that would pay top dollar for a front row seat to the smackdown: the legions of corporate chiefs that have been harangued over languid stock performances by these investors.
-- Dana Cimilluca
