Exclusive: Reynolds and Reynolds explores $5 billion LBO - sources

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Published October 29, 2012

| Reuters

Reynolds and Reynolds, which provides business management software for auto dealers in North America and Europe, is exploring a sale to private equity that could fetch around $5 billion, several sources familiar with the matter said.

The privately held company has hired technology-focused investment bank Qatalyst Partners to manage the process and is in talks with a few major private equity firms about a leveraged buyout, the sources said on Monday.

Deutsche Bank is also helping Reynolds and Reynolds with a potential sale and has offered seller financing to potential buyers, the sources added.

The company has over $500 million in annual earnings before interest, tax, depreciation and amortization (EBITDA) and could be valued at around 10 times EBITDA, two of the sources said.

The sale process involves the largest private equity investors in the technology space, including KKR & Co LP , the sources said. The auction is early in the second round with management meetings scheduled to take place over the next few weeks, the sources said.

All sources asked not to be identified because the process is not public. Representatives for Reynolds and Reynolds and Deutsche Bank declined to comment. KKR and Qatalyst Partners did not immediately respond to requests for comment.

Dayton, Ohio-based Reynolds sells software tools that allow car dealers to run their operations, including providing car dealer websites, digital advertising and marketing services, as well as data archiving.

The company was founded in 1866 by Lucius Reynolds and his brother-in-law as a company that prints standardized business forms, and started to serve automotive retailers as major clients in the 1920s.

In 2006, the company was acquired by Universal Computer Systems (UCS) for $2.8 billion. The merged company retained the Reynolds name and is currently headed by Chairman and Chief Executive Bob Brockman, who used to run UCS.

Brockman's $2.8 billion buyout was funded primarily by a group of investors that included Goldman Sachs Capital Partners, the private equity arm of Goldman Sachs Group , and Vista Equity Partners.

(Reporting by Nadia Damouni, Soyoung Kim and Greg Roumeliotis in New York; Editing by Bernard Orr)

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