A Private Equity Analyst Must Have had Thanksgiving Dinner With a Meteorologist

Three years ago, Silver Lake Partners (a combination of six investment firms whose names are as familiar to Wall Street as Kellogg's is to cereals) bought SunGard. I knew nothing about the deal except that SunGard Availability Services and SunGard BancWare are "residents" of my report, "Automation in Banking." Sometimes I can predict acquisitions before the first spreadsheet is conceived, but not this time. So following is my own frivolous account of how this acquisition came about.During the past five or so Thanksgiving dinners, a meteorologist sat at the table of a large family reunion giving everyone his views about global warming and its potential consequences--hurricanes, for example. But Wally the Weatherman never got any respect from anyone in the group. "There he goes again," was the usual reaction. And why not. How many times has your weatherman been wrong?

Then in 2005, Ernie showed up, for the first time, by special invitation from Anastasia, who was sweet on Ernie because of his high academic performance at the Kellogg School of Management (ranked by Business Week as the #1 MBA school in the U.S.). Ernie summarily ignored the cynics at the Thanksgiving table, especially when one uncle asked him, "I heeah yaw a smaaht fellah so why didn't ya go ta Haahved?" In perfect nerd-like style, Ernie never uttered a word, because first, he didn't want to offend Anastasia, but second, he was busy texting everything Wally was saying.

Later, in his closet-size apartment, while every American was digesting their gluttonous intake of turkey and trimmings, Ernie, now a rookie at SLP who turned down lucrative offers from Bear Stearns and Lehman Brothers, was hard at work. Ernie knew how to develop matters such as weather phenomena, which were seemingly incongruous with moneymaking schemes, into wise investment opportunities. He wrote a very impressive report and presented it to the partners on Monday. He tried to do it on Friday, but as everyone in the U.S. knows, Thanksgiving is a four-day lock down.

Not only did Ernie's report stand on its own merit, because the name SunGard is #1 to disaster recovery just as Oracle is #1 to database systems, Microsoft is #1 to PC-based operating systems, and Hewlett-Packard is #1 (leapfrogging IBM thanks to the EDS add-on) to anything having to do with a computer, but Ernie also included a bonus in the deal. A unit of SunGard called BancWare is in the risk management business but hardly known to many businesses including Countrywide, IndyMac, Freddie Mac and Fannie Mae. The BancWare add-on, although small, contributed "afterburner thrust" to SunGard as the company that makes its living on disasters (natural and man-made). Investors love anything that can provide value-add to the main event in case something was "oopsed" in the due diligence phase.

The long and short of it is the deal was struck and it's now, not just history, but I imagine a huge windfall for SLP. Why do I say that? Because there's profit in tragedy. Disaster Recovery and Risk Management are now two of the hottest selling technologies in the banking industry. The reasons should be obvious to anyone who still reads a newspaper, has a radio in their car, watches the news on TV, or surfs the Internet--hurricanes and mortgages.

The happy ending of this story is that Ernie is now admired, not only by Anastasia, but by all the partners at SLP. There's a story going around at the firm that the partners wish there were more Thanksgivings in the year so Ernie could come up with another brainchild. But the only child Ernie and Anastasia are thinking of these days is the Sarah, Barak, Joe or John they are expecting in a few months. That's why they bought a $3 million condo, sans parking space (with an above-prime mortgage) in the Back Bay. They will allocate one of their five rooms to serve as a nursery. The large living/dining area will accommodate future family gatherings so that Anastasia can play hostess to her relatives. Ernie, of course, has more than altruistic motivation for this gracious display of family values. He's looking for the next "Wally" because he learned, whether at Kellogg or just schlepping through the business world, that life is full of lemons, but things get sweeter when you possess the sugar bowl of an open mind. He's got a great future, no matter what.

Disclaimer: This story is approximately 59 percent fiction, and it's the result of a blogger's occasional need to lighten up. I'll get back to my normal fact-based blogs now that summer and fun are over.