After a five-year hold, the Bain Capital-led investor group that owned BMC Software has nearly tripled its money.
KKR on Oct. 2 closed its buy of BMC, a provider of IT-management software tools. The sale was pegged at $8.3 billion, according to various reports. BMC had about $5 billion in debt, a source said.
KKR’s acquisition of BMC is one of the biggest tech transactions since the financial crisis. The sale also represents a strong return for one of the first club deals since the 2008 downturn. Bain and the investor group are making about 2.77x their investment, the person said.
BMC produced $1.8 billion in revenue for the 12 months ended March 31, Moody’s Investors Service said in a July note.
With the sale to KKR, BMC is highly leveraged. Moody’s said the company has about 9x debt-to-EBITDA but noted that BMC’s debt would drop to about 7x once certain expenses and costs cuts are accounted for and excluded.
The PE takeover of BMC dates to September 2013 when a group including Bain, Golden Gate Capital, GIC and Insight Venture Partners acquired the Houston company for about $6.9 billion.
The PE firms committed a relatively small amount of equity, about $1.1 billion, to the deal, the source said. The firms combined the $1.1 billion equity with $1.4 billion cash from BMC’s balance sheet to fund the buyout.
In April 2014, BMC paid out a $750 million dividend to its sponsors. This reduced the investor group’s equity investment to just $350 million, or about 5 percent of the deal value.
BMC does not appear to have paid out any other dividends. The company in February was considering an IPO as a way to allow its investors to cash out, Reuters reported.
Here’s how our calculations work out: Not including debt, KKR bought BMC for $2.3 billion. Add the $750 million dividend from 2014 and the PE firms appear to have gained $3.05 billion. This is then divided by the $1.1 billion initially invested and the buyout shops are making about 2.77x their investment.
Executives for Bain, Golden Gate and BMC declined comment. GIC and Insight Venture Partners could not be reached for comment.
Action Item: Contact BMC CEO Peter Leav at +1 855-834-7487