bloggingbuyouts

LinkedIn is the social networking operator that just about every business person has received an invite to join from at least one person they know.

The company issued a press release this morning noting that it has secured $53 million in additional funding in a capital raise. This was its fourth and largest round of funding and is said to value the company north of $1 billion. What is perhaps more interesting than anything is that the finding was from a private equity-led group rather than from venture capital. Bain Capital Ventures, the VC unit of Bain, led the financing with additional reinvestment from the company's existing investors:

• Sequoia Capital,
• Greylock Partners,
• and Bessemer Venture Partners.

Over 23 million professionals use LinkedIn to keep in touch with old contacts, to reach new contacts, to problem-solve, and more.

To top matters off, CNBC hosted the head of the company, Dan Nye, earlier this morning and the hint of going public was much more than a hint. It seems like you can probably expect an S-1 filing with the SEC in the relatively near future if things continue, although that timing could be later in 2008 or into 2009 or even never. But the 'we are going for valuations much higher than this' line was a hard one not to notice. Personally, I'll go ahead and 'bet the over' that we see an IPO filing in the coming months as long as market conditions don't go further awry.

An article by South-African based Business Report summarizes private equity trends this year amidst the crunched credit markets and slowing U.S. Economy. While it isn't exactly 2007 or 2006, the numbers are still impressive.

According a Private Equity Intelligence Study cited in the article, in the first three months of 2008, private equity funds have raised $163.5 billion.

Last year, leveraged buyouts tripled the $73 billion posted in the same period this year. This article is also confirming what we have started seeing in many such private equity trends for the start of 2008, as it notes that leveraged buyouts are being replaced with distressed debt. That is amounting to $40 billion being raised by 31 firms so far. For example, Bain Capital's hefty $13.5 billion fund targets distressed debt, as well as venture and property.

Clear Channel Communications Inc. (NYSE: CCU) looks like they are just going to have to stay public. Shares closed down over 5% to $32.56 on the day but shares are down over 15% to $27.40 in after-hours trading. The Wall Street Journal has reported that the $19 Billion club-deal with private equity firms Thomas H. Lee and Bain Capital Partners LLC and their bankers is all but dead.

This has been covered here with more than skepticism as the real chances of the merger closing, usually with plenty of email responses claiming all is well.

If this deal does end up getting closed, it may get to apply for the Guinness Book of World Records for the biggest and longest merger in history. This volatility behind this merger is starting to look like a soccer match played by kindergartners on a hockey rink.

Someone please just turn out the lights and call this game a loss or a draw.

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.

3Com Corporation (NASDAQ: COMS) is essentially delaying any material events from coming in the shareholders' meeting scheduled for Friday, March 7, 2008 as it has again delayed the vote on the pending Bain Capital Partners & Huawei merger until Friday, March 21, 2008.

This extra 14 days is to allow 3Com to continue working with Bain Capital Partners to construct alternatives to address concerns raised by the Committee on Foreign Investment in the United States (CFIUS) regarding the pending merger. 3Com does note that there are no assurances that the discussions will not adversely affect the terms of the pending merger transaction.

There has already been an offer on the table that would have resulted in an already lower price, so at a minimum shareholders should already expect that to be a fact. Based upon how this has traded, it seems that the group is just going to be unable to please CFIUS as long as Huawei in China is involved in the deal. It would seem that without Huawei in the deal, the need to acquire 3Com is a far less profitable venture.

3Com hasn't been able to make the magic work, so being overly excited here is a hard task. With shares down 1% today, it sure looks like traders and investors aren't putting too much faith in this merger.

There was a large move of almost 6% today in shares of Clear Channel Communications (NYSE: CCU). There was a note that a trial is being set from yesterday, but the talk out there today was that this was soon going to be a done deal.

The truth is that this one has been like watching a soccer game and is still in the pending stage with a suspiciously wide arbitrage spread. Even after a large move up today and even with a large move from the high $20's in early February, the spread here is still huge in the deal from Bain Capital and Thomas H. Lee Partners LP for $39.20.

It is wide enough that it still should bring more questions than answers. At a $33.68 close, this one has a merger arb-spread of some 16.3 percent. That isn't as high as it has been, but it is still questionable. I have been questioning this along with other failed deals even though this one is still in the "pending" status.

There are two words come to mind here: speculation, or rumors. This one is still a head scratcher. For whatever it's worth, if this closes it may be the last or one of the last giant club deals in private equity buyout land. Every time this one is discussed, the opinions vary wildly.

3Com Corp. (NASDAQ: COMS) is postponing its vote that was scheduled for today over the proposed acquisition. That isn't really a surprise since the company and the Bain-led group had to withdraw their merger approval application because of CFIUS concerns.

But what is sort different is that the company is going to reconvene the meeting and vote next week on March 7, 2008. The merger was already indicated that a lower price was coming because of a divestiture that would have been a merger concession to secure CFIUS approval. It appears that 3Com and Bain Capital might be making another run at CFIUS with more concessions.

3Com continues to work with Bain Capital Partners to construct alternatives that would address concerns regarding the company's pending merger transaction with affiliates of Bain Capital Partners. The companies are leaving themselves an out if this doesn't work out:

• "There can be no assurance that these discussions will not adversely affect the terms of the pending merger transaction, including valuation, or that these discussions will result in an alternative that adequately addresses CFIUS' concerns."

We'll see if this will really yield a merger approval or not. 3Com shares are up 20% to $3.50 on renewed hops that the merger will go through. Concessions will likely lower that price far under the $5.11 highs seen over the last 52-weeks, but there's a shot this could still end up being a win for those who have invested in 3Com since the original merger was withdrawn.

3Com Corp. (NASDAQ: COMS) is seeing a severe snag in its acquisition process, and one that appears may actually kill the merger. This morning it has announced along with affiliates of Bain Capital Partners, LLC and Huawei Technologies that the parties have withdrawn their joint filing for a merger approval to the Committee on Foreign Investment in the United States.

In the release, the company noted that it was disappointed that it was unable to reach a mitigation agreement with CIFIUS to secure the necessary merger approval. 3Com's board of directors approved the merger back on September 28, 2007. While both parties remain committed to continuing discussions, it is fairly difficult to imagine that they will be able to overcome government oversight.

3Com is going to have to go back to basics and focus on its own business plan for the time being, regardless of continuing discussions. Read the rest of the backgrounder at 247WallSt.com.

Jon Ogg is a partner and editor of 247WallSt.com.

On Tuesday, Bain Capital Partners responded to national security concerns regarding its $2.2 billion buyout of 3Com Corp. (NASDAQ: COMS). A detailed article from late yesterday is here from the Associated Press.

Bain and affiliates have offered several proposals to the U.S. government in order to secure its pending buyout. It is unclear if these will secure the merger or not. National security concerns about sensitive military technology lie in the 16.5% stake held by Chinese telecommunications company Huawei due to the inherent close relations with all large Chinese companies and Chinese government.

Bain has asked for a review with CIFIUS, the Committee on Foreign Investment in the United States, to gain approval of the buyout. The shareholder vote is on February 29, 2008, although shareholders are expected to approve the deal. That is a different matter than the pending CIFIUS review.

3Com shares are having their best day perhaps since the buyout deal was even announced last year. Shares are up 8% today to $4.13.

We have noted this and other at-risk mergers earlier. While it is understandable that critical data protection is normal for any government, it is actually somewhat surprising that so much critical government data is passing through 3Com equipment.

Jon Ogg is an editor and partner at 247WallSt.com.

For months, we've expected someone to pick up Guitar Center (NASDAQ: GTRC), the largest U.S. musical instrument retailer. Now, Bain Capital Partners affiliates will pay $1.9 billion in cash, or $63 per share, equal to a premium of 26% over yesterday's closing price of $50.06. Additionally, the buyers will assume about $200M in debt. Goldman Sachs Group (NYSE: GS) helped to auction them off, and the deal is expected to close in the fourth quarter.

Guitar Center, which went public in 1997, now has over 210 stores. Last year they bought instrument retailer Woodwind & Brasswind for about $30 million. Back in March came word that Sageview Capital upped its holdings to 8.69%. Brokers responded with strong buys, buys and some holds, based on expectations of solid growth in the year ahead. Now it's time for private equity to tune it up. The stock had been a disappointment and the direct response business needs help.

Given the role that the private equity boom has played in sustaining the bull market, I'm always on the lookout for industry insiders opining on the current state and future of private equity. On Friday, Bain Capital's Orit Gadiesh and Hugh Macarthur discussed the role that firms like theirs can play in helping companies navigate through tough times. Here are some of their key points:

• ... Public companies are constrained by Sarbanes-Oxley, which can slow down or hamper fixes needed for the mid-to-long haul. Private-equity shareholders... behave like active owners. They understand the companies they own and drive them to address problems more rapidly while investing more deeply in attractive longer-term initiatives.
• For one, private-equity firms invest with a thesis for improving performance in a realistic, but aggressive time frame -- three-to-five years. Compare that with public companies' quarterly earnings scramble...

What's interesting is that the precursors to today's private equity firms, LBO's and corporate raiders, were often chastised for their short-termism, with some even suggesting that their unwillingness to invest for the long-term threatened economic growth.

But with today's market where, for so many investors, long-term means overnight, it's the private equity funds that appear to be taking a long-term approach.

Given the difficulty of turning around a company that is under the glare of the public markets, private equity may have an important role in the market for a very long time. If that's the case, we might be able to relax and stop worrying about the possibility of a buyout bubble.

It's been tough going for the buyout of OSI Restaurant Partners (NYSE:OSI), which is the operator of the Outback Steakhouse. Basically, shareholders have been agitating for a higher price.

As a result, OSI's private equity buyers -- Bain Capital Partners LLC and Catterton Partners – postponed the shareholder vote twice. But isn't this just delaying the inevitable?

Well, today the private equity buyers upped the bid from $40 to $41.15. This comes to roughly $3.1 billion.

It may seem like a small adjustment, but it's likely to get enough support. After all, OSI's business has been soft lately.

But, this is also a sign that shareholders are wielding their power. So, going forward, it's a good bet we'll see increased bids on major buyouts deals.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

CNBC's David Faber is reporting that Bain Capital and Thomas H. Lee Partners are prepared to raise their offer for Clear Channel Communications (NYSE: CCU) to $39 per share, up from the current bid of $37.60. The shares closed yesterday at $36.72, the small discount indicating that many investors expected the private equity groups to sweeten the deal.

It remains to be seen whether the relatively modest increase of less than 4% will be enough to persuade investors to accept the deal. Calpers, which owns 3.3 million shares of the company, has voiced its opposition to the deal. I would be surprised if this $39 offer is the end of it. Based on the level of resistance to the $37.60 offer, I doubt such a small increase is enough to assuage the concerns of investors.