SunGard to Be Acquired by Private-Equity Firms

Company leadership denies likely breakup and says plans to spin off the company's backup-and-recovery services business have been halted.

SunGard Data Systems Inc., a Wayne, Pa.-based provider of software for financial-services companies and "hot site" backup-and-recovery services with $3 billion in annual revenue, disclosed Monday that it has agreed to be acquired by a group of private-equity firms for $11.3 billion.

The deal is expected to be completed sometime in the third quarter. The company said last week that it was up for sale.

Also, in a surprise move, SunGard has decided not to spin off its Availability Services Business (ASB). Last week, the company said the planned spin-off, which it revealed last year, was still on track.

The question now is whether the company will be kept intact or broken up. In addition to the backup and disaster-recovery services within its ASB division, SunGard's Investment Support Services (ISS) arm sells a variety of financial services-related software.

It is too early to tell what is likely to happen to the company's insurance systems subsidiary SunGard Sherwood, or indeed any of the company's component parts, according to Ed Blomquist, a New York-based analyst with Datamonitor. "SunGard said on its [public conference] call that the deal would not result in any asset sales," Blomquist reported. "The deal makes sense from a business standpoint, in that by going private they will be able to execute a longer-term growth strategy in ISS, which suits this financial tech division because it hasn't been getting the true value of the assets here while internal growth was slowing."

Customers would probably notice little impact if the company is broken up, as many already view it as a collection of discrete entities. HVB Americas, a customer of both SunGard's disaster-recovery services and its derivatives-trading financial software, still plans to go live in July with a new backup data center in New Jersey using SunGard Availability Services, CIO David Dart says. SunGard's decision not to spin off the disaster-recovery unit is a surprise, but it will have no impact on HVB's planning decisions, he says.

The acquiring consortium is led by Silver Lake Partners and includes Bain Capital, the Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts, Providence Equity Partners and Texas Pacific Group.

Editor's Note: This article, which includes a contribution from Anthony O'Donnell, originally appeared in InformationWeek, a sibling publication of Insurance & Technology.