martinwolf Transaction Analysis

Financial Information

• Transaction Size: $10+ billion

Transaction Facts

• Media reports yesterday announced that in what would be the year’s biggest leveraged buyout, Blackstone Group LP (NYSE:BX) and Carlyle Group LP (Nasdaq:CG) have made a joint bid for NCR Corp (NYSE:NCR), a manufacturer of cash registers and ATMs.
• The two private equity firms, the world’s largest, are rumored to be competing with other buyout firms including Apollo Global Management LLC and Thoma Bravo LLC. Both have historically been channel-friendly PE groups – Apollo acquired Presidio in December 2014, and Thoma Bravo has owned Sirius since 2006.
• The transaction is still at a very early phase – there is no guarantee that this bid will succeed or even that NCR will agree to a sale. According to the media reports, the auction is still several weeks from being completed.

Reduced Retailer Spending Drives Need for Transition

• Cloudy Future: NCR has faced falling net income, from $443 million in 2013 to $191 million in 2014, driven largely by retailers moving away from high-cost PC systems and toward cloud-based checkout solutions.  While NCR has focused on building its cloud capabilities, it has been criticized by shareholders for a perceived late entry into the cloud space and inability to halt the company’s declining performance.
• Ongoing Price Concerns Stymie Progress: According to media reports citing inside knowledge of the transaction, a sticking point in NCR’s ongoing negotiations has been price. NCR’s bankers are allegedly looking for a minimum of $36 a share – an amount that observers describe as “high” thanks to the company’s highly leveraged position and minimal growth.
• Transition Powered by M&A: As NCR has sought to transition away from a reliance on hardware revenue, it has made a number of acquisitions bolstering its software and services revenue and capabilities. Highlighted transactions include Digital Insight, an online and mobile banking company purchased in Dec. 2013 for $1.65 billion, and Retalix, a retail software and solution provider purchased in Nov. 2012 for $650M.