Savvis, the information tech services provider, has hired Qatalyst Partners, three sources say. Savvis, which denied in January that it was in sales talks, is now in discussions with several potential buyers, one person says.
However, another source says that Qatalyst’s hiring isn’t “definitive.”
Having Qatalyst as your financial advisor would be a major coup for Savvis. San Francisco-based Qatalyst is led by legendary banker Frank Quattrone. Quattrone, in case you forgot, is the banker who was found guilty in 2004 of obstructing justice and witness tampering but had the conviction overturned on appeal in 2006.
Quattrone has advised on some major deals including the IPOs of Amazon.com and Cisco. More recently, Qatalyst advised 3Par last year when HP and Dell were dueling for the company. 3Par eventually sold to HP for $2.35 billion, more than triple its business market value.
“We don’t comment on rumor and speculation,” a Savvis spokesman wrote in an email.
With Quattrone/Qatalyst advising, Savvis could get a good price. Rumors of the company’s sale began in January after Verizon Communications announced its $1.4 billion takeover of Terremark Worldwide. Time Warner, five days later, then followed up with a $230 million deal for Navisite.
“Terremark was first, Navisite is second,” a banker says. “Now it’s Savvis’s turn.”
In January, Savvis CEO Jim Ousley told my coworkers at Thomson Reuters that it was eyeing a partnership rather than a sale. Savvis, Ousley said at the time, does talk to IB’s but hadn’t put any on retainer.
“Savvis has been out looking for a banker,” a PE exec tells me.
Any sale of Savvis would be quite hefty. The company has a $1.86 billion market cap. Fourth quarter adjusted EBITDA, as of Dec. 31, was $67.8 million. Long-term debt was $747.2 million.
Private equity could be a buyer but any offer would likely come from the mega buyout shops like KKR, TPG or the Blackstone Group. Savvis will likely draw interest from strategics which could include SunGard. (SunGard is owned by a consortium of PE firms: Silver Lake Partner, Bain Capital, Blackstone, Goldman Sachs Capital partners, KKR, Providence Equity Partners, and TPG).
Also telecom service operators like AT&T could be interested or even regional providers like Windstream or Cincinnati Bell. A traditional service company, like IBM, could also be in play.
But don’t expect Savvis to sell for the same multiples as Terremark. One-third of Savvis’s revenues comes from network services which is more of a traditional IP transit solution, a separate source says. “That business has very minimal growth,” the person says.
Terremark sold for 14X 2011 EBITDA, while Savvis is trading at 9.5X. The 14X multiple would be the ceiling for any Savvis sale, the source says.
Qatalyst did not return calls for comment.