bloggingbuyouts

Many buyouts have failed over the last six months. That "material change" clause in every deal is frequently as vague as asking someone if they promise not to get mad at you before you tell them the problem. Many of these blown-up mergers have resulted in large break-up fees being paid out by the would be buyer to the intended buyout company. But many private equity firms have been able to get out of these break-up fees.

The truth is that your definition of "a material change" will differ from mine, and mine will differ from others. You can bet that "a material change" differs greatly between the opinions of a buy a seller. Here are some of the deals where break-up fees "ot other damages and penalties" may come up shortly.

3Com Corp. (NASDAQ: COMS) just hinted at this today, as it wants a YES Vote from holders from the Bain-led offer and noted that it has been unable to appease CFIUS review concerns because of Huawei's involvement in the deal.

Developments between Alliance Data Systems (NYSE: ADS) and The Blackstone Group LP (NYSE: BX) are starting to heat back up again.

This pending Clear Channel Communications inc. (NYSE: CCU) has been noted as the longest standing current large club deal that is still in pending deals, but all indications point to the banks wanting to get out of the loans. They might not be able to get out of it. And they might. After this long, it isn't even clear what damages would be eligible if any. Scott Sperling of Thomas H. Lee was just on CNBC shortly to discuss the Clear Channel deal, and to discuss his new $10 billion fund he recently raised. He didn't comment about Clear Channel, but he said it may take another 6 to 12 to 18 months before values and conditions come in line with deal making strategies.

Someone had to put together a list of LBOs that may fall apart because the stock markets are down. Leave it to the editors of The Wall Street Journal.

Making the hit list are Clear Channel (NYSE: CCU), Alliance Data (NYSE: ADS) and BCE (NYSE: BCE).

The newspaper is stating the obvious. The market already knows the deals are unlikely to close. BCE shares trade at $34, down from at 52-week high of $44.59.

The by-products of these problems are two-fold. The first is that LBO firms have obligations to close some of these deals. That means that break-up fees or lawsuits may be on the way. Boards at these companies may have little choice if their shareholders are billions of dollars underwater.

The other factor is that trust in LBO firms will probably fall to all-time lows with public companies. Whatever happened to the "our word is out bond" stuff?

Douglas A. McIntyre is an editor at 247wallst.com.