Investment Firms Offer $10.5B for SunGard

Computerworld - SunGard Data Systems Inc. disclosed last week that it's in discussions with a consortium of private investment companies seeking to purchase the financial services disaster recovery service provider for more than $10.5 billion.
SunGard declined to identify the potential buyers, which reportedly include Silver Lake Partners, Kohlberg Kravis Roberts & Co., The Carlyle Group, Bain & Co., Texas Pacific Group, The Blackstone Group Inc. and Thomas H. Lee Partners LP.
Consultants and analysts said they believe the group will likely sell off SunGard piece by piece, a prospect that was of little concern to several users interviewed last week.
"These guys are interested in flipping that thing -- either ripping it apart for its pieces or putting lipstick on it and getting out as soon as they can," said Steve Duplessie, an analyst at Enterprise Strategy Group Inc. in Milford, Mass.
David Dart, CIO at HVB America Inc., a New York-based division of financial services firm HVB Group, downplayed the breakup theory.
"I doubt very much that there would be any negative impact to me, the customer, as a result of the investors breaking up and selling the individual components of SunGard," Dart said. "They all appear to me to operate independently. It's already like dealing with a number of different firms."
Jerry Klawitter, a vice president in charge of business continuity planning at J.P. Morgan Chase & Co. in New York, agreed, adding that "the shuffling of SunGard will be interesting to see."
About 60% of SunGard's revenue comes from its software and processing business. The rest comes from its Availability Services unit, which offers managed hosting of storage, data security, records management and disaster recovery.
The company has operations in 60 locations.
Last May, SunGard announced plans to spin off its disaster recovery business and take those operations public . Under the plan, SunGard Availability Services was to retain the SunGard name and about 2,000 of the company's workforce of 13,000 people.
A SunGard spokeswoman said the company is continuing with that as-yet-unfinished plan until any buyout is final.
"We're concurrently proceeding with the spin-off, because unless we have a deal, it doesn't make much sense to deviate from our plans," said Madeline Hopkins.
Hopkins declined to comment further on the deal.
Tom Jordan, CEO of Jordan & Jordan Inc., a New York-based technology consulting firm specializing in the financial services industry, predicts that a buyout of SunGard will have little effect on customers, which include many top financial services companies.
Jordan said SunGard has grown through aplethora of acquisitions, so a sell-off likely won't affect the separate business operations.
"They'll be dealing with the same people when they spin off the companies," Jordan said. "If there ever was a company that was made for buying and selling off in pieces, this is the company."

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