Luckily, Barron’s has compiled a list of the top dozen LBO candidates. PE firms need to do deals because they are sitting on tens of billions of commitments from institutional investors and will be forced to free investors from those commitments if they don’t invest the funds, the story said. There’s also been a lot of talk about how a $10 billion deal is possible now (although we haven’t see it yet).
LBOs usually require a lot of debt so many of the targets that Barron’s names have significant cash on the balance sheet or relatively modest debt. The tech sector is also ripe for LBO investment because tech companies usually have strong, cash-rich balance sheets, Barron’s says.
Several tech companies made the list, including Fidelity National Information Services. This is an easy one. Earlier this year, a Blackstone-led consortium tried to buy Fidelity National, a payment processor, for about $15 billion, but the deal fell apart after the buyers and sellers couldn’t agree on a price. Fidelity National could be a takeover target again, Barron’s says. Fidelity National’s stock is trading at $28 a share, below the price that Blackstone was reportedly willing to pay.
Seagate Technology also made the list. Last week, Seagate last week confirmed it was in talks to go private again. TPG and Silver Lake last month were reportedly in discussions to buy Seagate but those talks failed. KKR and Bain Capital are now interested, Reuters says.
Dell also made the cut. Despite its current market value of $28 billion, a buyout is doable, Barron’s says. CEO Michael Dell is also more open to an LBO.