Brief: Private Equity Casts An Eye On Tech

ACS and Kronos deals add up to more than $7 billion in buyout bids.
Two deals last week show that tech companies won't be left out as private equity groups look to invest their cash hoards.

2007 Tech Bids

$5.8 billion
Cerberus for ACS

$1.8 billion
Hellman & Friedman for Kronos

$430 million
Oak Hill for Vertex
Data Science
The most controversial bid is for outsourcer Affiliated Computer Services, the target of a $5.8 billion leveraged buyout from Cerberus Capital Management and ACS founder Darwin Deason, opposed by two shareholder groups that filed lawsuits last week. The $59.25-per-share offer is about a 16% premium over what ACS shares traded at before the bid.

Taking ACS private would let it--and Deason--escape the regulatory spotlight. CEO Mark King and CFO Warren Edwards stepped down in November after the company conceded that their options had been improperly backdated. Questions also have been raised about a deal under which ACS leased a corporate jet from a company owned by Deason.

In the other deal last week, Kronos Software, which makes HR applications, is to be acquired by Hellman & Friedman Capital Partners for about $1.8 billion. Kronos chairman Mark Ain said the buyout resulted from a "thorough review" of its strategic options.

Private equity firms used to shy away from tech as too risky, but that feeling's faded, says Harvard Business School professor Josh Lerner, thanks in part to the success of tech buyout specialists such as Silver Lake Partners and Francisco Partners. Now, investors covet the steady cash flows some tech companies get from long-term service and support contracts, Lerner says.

Private equity firms invested $370 billion last year, says Thomson Financial, twice 2005's level.

Editor's Choice
Brandon Taylor, Digital Editorial Program Manager
Jessica Davis, Senior Editor
Cynthia Harvey, Freelance Journalist, InformationWeek
Terry White, Associate Chief Analyst, Omdia
John Abel, Technical Director, Google Cloud
Richard Pallardy, Freelance Writer
Cynthia Harvey, Freelance Journalist, InformationWeek
Pam Baker, Contributing Writer