Private Equity Wave Engulfs Intergraph

The private equity wave that I wrote about is beginning to be felt visibly.I was just speaking to a very senior industry executive a few hours back after my long travel and the common thread of the discussions were about how private equity investors are seriously looking at acquiring undervalued companies. Here comes the announcement that Intergraph is being acquired by an investor group led by Hellman & Friedman LLC and Texas Pacific Group in a transaction valued at around 1.3 Billion, approximately 3X sales. Intergraph apparently brought in their CEO Halsey Wise to increase shareholder value, settle the intellectual property law suits, and dress up the company to be attractive for takeover.
In general, equity investors are drawn towards companies that show a lot of free cash flow and that which has parts which can be profitably hived off to achieve higher returns on investment. In this case their GIS division could be acquired by an enterprise major – Hopefully oracle /Microsoft /SAP may find it attractive. There is also a lot of talk in the streets about private equity moves in the Indian market centered on offshoring companies. I suspect this may be tough as the regulations are not exactly friendly to private equity players . For example share buy back is not allowed – promoters may not agree for a complete relaxation of the regulations unless buy back provisions are allowed. Some in the Indian technology industry were happenstance entrepreneurs in this field – so they may find it attractive to exit- afterall the infrastructure sector looks so attractive for new ventures inside the country. Certainly, one can expect more action centered around private equity in the tech sector.