Kirkland & Ellis, Gibson, Dunn & Crutcher, and Watchell, Lipton, Rosen & Katz have taken lead roles on the announced $4.4 billion acquisition of U.K.- based travel technology firm Travelport Worldwide Limited by affiliates of Siris Capital Group and Evergreen Coast Capital, the private equity arm of activist investor Elliott Management Corp.
Kirkland corporate partners Daniel Wolf and Shaun Mathew advised Travelport on the deal. Gibson Dunn M&A and private equity partner Richard Birns and tax partner Eric Sloan acted as counsel to Evergreen. Wachtell attorneys advising Siris included corporate partners Andrew Nussbaum and Igor Kirman, antitrust partner Ilene Knable Gotts, finance partner Joshua Feltman, executive compensation and benefits partner Andrea Wahlquist, and tax partner Jodi Schwartz.
Expected to close in the second quarter of 2019, the deal gives the private equity players ownership of an innovator in the travel technology space whose IT systems and services are of value to airlines, car rental agencies, hotels, and business-to-business payment providers.
Kirkland partner Daniel Wolf sees the deal as partly a reflection of the needs of a tech company at a certain phase in its growth. When a tech firm has had a bit of time to develop its IP assets and build its business, it may cease to be a match for the investment strategies of tech investors looking for new firms with the potential someday to become the next big thing.
“As the tech companies that went public in the late 1990s up through 2010 start to mature, they’re no longer growth stories, they’re cash flow stories. There’s a feeling that they are not getting properly rewarded in the public market because of the growth orientation of tech investors. Hence they become attractive acquisitions for the private equity firms,” Wolf said.
Another factor that makes tech companies riper acquisition targets for private equity players is that the latter tend to be more forgiving of the restructuring that tech companies often need to undertake after having focused more on innovation and IP than on the nuances of corporate governance over the years, Wolf observed.
The deal is the latest in a series of high-value transactions engineered by Wolf in the technology space. His recent engagements include advising technology firm Colfax Corp. on the $3.15 billion acquisition of DJO Global, representing Vista Equity Partners in the $1.94 billion acquisition of business management systems pioneer Apptio, and providing counsel to Mazor Robotics in its $1.64 billion sale to Medtronic.
Deals of this nature highlight the need for law firms to be able to deploy transactional lawyers with highly specialized skills on the pricing and valuation side. In some tech deals and, particularly, in pharma deals, the assets changing hands could be worth billions of dollars when they reach their full market potential. Parties often disagree on valuations, which must take into account far more than a company’s EBITDA shifting a few percentage points, Wolf noted.
“It requires a completely different skill set or mindset to do a valuation in those deals, and you end up having to approach it with a completely different model. That’s how you sometimes end up with unique considerations structures like contingent value rights,” he said.