Buyer Remorse Redux?
Another private equity group is having second thoughts about a deal it made prior to the credit crunch.
Kohlberg Kravis Roberts & Co. and other investors are apparently getting cold feet about plans to buy the District's Harman International., the maker of high-end car stereo and other components. According to the WSJ (subscription required), some people are whispering that they've found out information about the company they didn't know before. , which if significant could allow them to back out without having to pay a $225 million walk-away fee.
Of course, no one would tell the Journal what the information was, so it's impossible to assess the merits. If the information were significant enough, the private equity firms could use that as leverage to negotiate a cheaper deal or even back out without having to pay a $225 million walk-away deal. But buyout firms don't like to walk away because it hurts their credibility with future targets: Who wants to go through all the trouble to sell and then have a buyer walk away after they shook hands?
The Journal did say the private equity companies had gone to their bankers to see if they might kick in a couple dollars towards the walk-away fee. The bankers were not thrilled with the idea.
On Thursday, there was similar discussions going on about a deal to take Sallie Mae private. Sallie put out a statement insisting a deal is a deal.
Stay tuned for how all this turns out.
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