• After initial discussions to sell ATM and cash register manufacturer NCR were unsuccessful earlier this year, media reports today claimed that private equity giant Blackstone was nearing a deal to invest more than $800 million for a 15+ percent stake.
• The type of deal, a PIPE or “private investment in public equity,” has historically occurred when companies have been unable to achieve a full sale and still need resources to facilitate changes. In 2014, Blackstone invested $200 million in Crocs Inc.
• This deal would complete a transaction process that was first reported in April and has been reported to have included Carlyle, Apollo Global Management, Thoma Bravo and other major private equity firms.

A Needed Change

• Low Valued Compared With Peers: NCR has moved beyond simply providing hardware and software, offering complementary support and professional services. However, at approximately 1.1x, NCR’s EV/Revenue multiple remains notably lower than its industry counterparts. Indian outsourcing valuations range from 3-5x revenue, higher-end services providers like Accenture and IBM are at an approximately 2x revenue multiple.
• Strong Name, Weakening Sector: NCR’s core strength has been in the retail sector, but today they have a stronger name than they do a presence. Unfortunately for NCR, the perfect storm of electronic payments and the “Amazonification” of shopping has weakened the demand for both traditional Point of Sale systems and cash-oriented products like ATMs. But while some see decline, others see opportunity-Clearlake Capital Group believes in its retail-oriented portfolio company Tolt Solutions and used it to acquire Pomeroy last month.
• Significant Debt: Between Blackstone’s $800 million investment, a rumored $1 billion share buyback, and NCR’s existing $3 billion in debt, this transaction would leave NCR with a very high debt-to-equity ratio, especially for a solution provider.
• Room to Grow: When Blackstone was first rumored to have made a bid for NCR, it was reported that NCR’s bankers were looking for a minimum of $36 per share. Today, the company trades at $26.78 – significantly off its mid-2013 height of $41.56 per share. With Blackstone as a partner helping the company to focus on higher margin offerings like its software business, the company could get the initiative it needs to achieve meaningful growth (as Blackstone has achieved with Accuvant, now Optiv).