Gaining Currency By Going Private In This Economy

On its Q209 earnings call, Bankrate (NSDQ: RATE) CEO Tom Evans spoke at length about his company’s decision to go private, in a pending deal to be acquired by Apax Partners for $571 million. Some good thoughts on why it made sense, though I’m intrigued by the tone they’ve taken: “We sucked in this sucky economy, hence we’ll be a lot better under Apax,” which doesn’t really sound that good from an acquirer POV. From the call, probably its last before it closes the deal: “Given the economic environment and the lack of visibility, our Board felt that the situation and the position that the company would be in would have made it extremely difficult for us to manage and execute our business effectively, would have made competing for acquisitions much more difficult if not impossible and, lastly, could have made the task of retaining key employees more difficult. For those reasons and more, we believe that the right decision to our shareholders was to lock in a value at a premium now, rather than take our lumps and grind it out over the next several years, hoping to get back to that level at some point down the road.” On their own M&A strategy going ahead: “There’s just more M&A activity now. I think and I believe…six to 12 months and so we want to be in a position to participate in there.. What’s easier about it, first of all, through a financial sponsor, there is access to capital. If we were, for example, to struggle for the next several quarters and the stock price was halved from where it was, that$24, all of a sudden, a $200 million acquisition becomes enormously expensive relative to, first of all, the$55 million in cash and I picked a number, a low teens stock price. How do make an acquisition of that size? How do you compete? You can’t do it. You can’t borrow the money. You can’t or it would be almost suicidal to be doing that kind of an acquisition with stock. So you watch these things go by the wayside and other people are building a business. You are missing assets that could help build a business while you are waiting for the sun to come back out. So I think it just makes it a much, much tougher environment in which to compete and grow and develop. So that’s the thinking.”