SunGard Data Systems announced on Monday that it's in talks to sell possibly the entire company. A consortium of private equity companies is interested in buying the financial software conglomerate, which caters to the financial services industry,for as much as $10 billion, according to published reports.
SunGard declined to comment on any potential transaction, but issued a statement confirming that it has authorized its advisers and management to engage in discussion concerning a possible purchase of the company. As of press time, no deal had been announced.
Meanwhile, industry experts are speculating that the potential buyers -- a group of private equity firms including Texas Pacific Group, Thomas H. Lee Partners and Silver Lake Partners -- will eventually sell off chunks of the diversified software company that serves the software and processing needs of banks and brokerage houses.
"For these private equity guys, their goal is to make money. If that means chopping it up and selling pieces to someone else, they'll do what's needed," says Sang Lee, managing partner at Boston-based Aite Group. The question now for the private equity firms is whether the sum of the parts is worth more than the whole, adds Lee.
"Nobody outside of SunGard has a better view of the value of SunGard than the private equity group," says Steve McLaughlin, founder and managing partner of Financial Technology Partners, a San Francisco-based investment bank focused on financial technology.
"If they believe there is value in these companies, you can be sure there is given the strong track record of investing of these three firms," says McLaughlin, a former Goldman Sachs banker who recently represented Liquidnet in a $250 million private equity deal.
Industry sources say SunGard, the acquisition-centric technology company, which bought 100 or so companies, has been in play for several years because it did not integrate the various assets that it bought, and therefore did not create an integrated solution for financial services customers.
SunGard owns BRASS, one of the leading sell-side order-management systems; Phase3, securities processing to settlement system for banks and brokerage houses; as well as SunGard Transaction Network (STN), an order routing network. Its software handles about 70 percent of all Nasdaq trades. In addition, the company provides software and outsourcing solutions for portfolio accounting, wealth management, data management and risk management.
However, Lee says, the main stumbling block to a sale had been the organization of its two business units into software processing and business continuity.
"The type of investors that would be interested in the business continuity business would be different than the investors that would be interested in the software," he explains. Last October, SunGard announced its plan to spin off Availability Services, its business continuity business. That opened up the potential to sell the software processing side of the business, says Lee. Availability generated 40 percent of 2003 revenues, while the software and services business generated 60 percent. According to Monday's announcement, SunGard will proceed with the planned spin-off of the company's Availability Services business; at the same time it's holding discussions concerning the purchase of the company. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio