The trail of broken shareholder hearts does not seem to be coming to an end. Data management company Acxiom (ACXM) is in talks with ValueAct Capital and Silver Lake about breaking off their plans to take the company private. The price was to be $27.10 in cash. The stock is trading at under $20, so that markets had doubts about the deal already.
All Acxiom may end up with is a break-up fee.
But, the private equity interests may have to argue that there was an important change in the company’s fortunes–material adverse-effect. The company did lose money in the last quarter, but that may not be enough to prove a major change.
Acxiom’s board may not sue the two private equity firms. But, the company’s shareholders may. The side-effect of all of these buy-out walk-offs could well be a series of class action lawsuits brought by company shareholders. This certainly went on when a number of internet companies lost their value and investors blamed management and Wall St. research firms. Suing when the share price drops is a time-honored tradition among public company stock holders.
No, private equity does not have to fear the rational and conservative members of America’s public company boards. Their risk is from rabid and unreasonable individual shareholders and institutions. The ones who lost their money.
Douglas A. McIntyre