Warburg Stands to Make 3x Money on Wall Street Systems Sale, More on Iron Data–UPDATED

I have more info on the Wall Street Systems sale.

Yesterday, I reported that ION Trading, which is backed by TA Associates, was buying Wall Street Systems. Warburg Pincus owns a majority of the company. The PE firm expects to make make more than 3x its investment on the sale of Wall Street Systems, a person familiar with the deal says.

Wall Street Systems is selling for north of $500 million, two sources say. Deutsche Bank is advising on the sale, sources say.

The auction nearly took a nasty turn last year. The sale of Wall Street Systems began last fall and Warburg was seeking a high valuation for the company. Wall Street Systems has about $40 million in EBITDA and was looking for bids in the low teen multiples, one PE exec says.

“[Wall Street Systems] has a good team,” the PE source says. “It’s a solid business. But not a huge growth business.”

Several middle market PE firms–which are believed to have included Welsh Carson and Summit Partners–looked at Wall Street Systems. The high value expectations caused some of them to turn away. In fact, the company had a buyer lined up by the end of the year but the deal fell through. Warburg then pursued a recap of Wall Street before TA showed up with an offer, one banker says.

So what does this mean? M&A may have rebounded but unrealistic price expectations can still scuttle an auction. Remember First American Payment? Lindsay Goldberg, which owns First American, was seeking bids of 12x EBITDA for the company last fall. The PE firm had to pull the First American auction after bidders walked away (Lindsay Goldberg ended taking a dividend out of First American via a recap). Luckily, Wall Street Systems did find a buyer.

There’s also more news on Iron Data. Arlington Capital today announced it was buying the developer of software for local and state governments.

I reported the sale of Iron Data back in March. The seller is Thompson Street, a St. Louis-based PE firm, which acquired Iron Data in November 2007. UPDATE: Chris Reed, president of Iron Data’s public sector division, says Arlington Capital has bought a majority of the company. The sellers are Thompson Street, which owned a minority, and Delta Ventures, he says. Iron Data’s management will also have a stake in the company, Reed says. No job cuts or management changes are expected. Dan Cornell, of Morgan Keegan, advised Iron Data while Arlington didn’t use an outside financial advisor.

It’s unclear how much Arlington invested. But the PE firm has put in more equity, according to Standard & Poor’s Leveraged Commentary Data. Arlington was seeking a $110 million senior secured buyout loan that was cut to $85 million, LCD said. Arlington is putting in around 40% equity, up from 30%, LCD said.

A spokesman for Warburg declined to comment. Officials for Deutsche Bank, TA, Arlington Capital and Thompson Street could not be reached for comment.

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