Take-privates are taking more money

Contact: Brenon Daly

Even though the volume of take-privates has plummeted this year, the deals that are getting announced appear to be far more competitive than they’ve ever been. At least that’s true after the LBO is announced. So far this year, we’ve seen terms get raised in four take-privates, due to either named or unnamed bidders.

The latest: On Tuesday, an unidentified private equity (PE) firm offered $8 for each share of MSC Software, topping the existing agreement for $7.63 per share that buyout shop Symphony Technology Group had with the maker of design software. The new bid added about $18m to the price of MSC. That follows post-announcement raises in the LBOs of I-many and Entrust, which increased the final purchase prices by $19m and $9m, respectively. And then there was the bidding war over SumTotal Systems between Vista Equity Partners and Accel-KKR that saw the final price come in 50% higher than the initial offer.

But in the case of MSC, we probably shouldn’t be surprised that the initial offer got bumped a bit higher. After all, it was only a scant 13% premium over the previous closing price. Shares of the company actually traded at the price proposed by Symphony just a month before the PE shop unveiled its bid. Although to be fair, much of the run had been triggered by speculation that hedge fund Elliott Associates, the vendor’s largest shareholder, was pushing for a sale of MSC. (Under the plan put forward by Symphony, Elliott would have rolled over its equity.) For the record, the proxy filed in connection with Symphony’s bid indicates that Elliott actually first broached the idea of a sale to MSC in February 2008, a time when shares were changing hands above $12 each.