How Reader's Digest Bungled a Buyout

A few days later, Ripplewood came back with a revised bid for Reader's Digest. But this time it was proposing to pay just $16.50 a share for the company. The private-equity firm says the lower bid reflected the precipitous decline in Reader's Digest's stock and "the uncertainty and operational risk associated with achieving'' the company's earnings estimates.

Not happy with the turn of events, the board instructed Goldman Sachs "to continue the strategic process and, in particular, to determine if Ripplewood would pay a higher price.''

In the end, however, no other bidder emerged for Reader's Digest. Ripplewood did up its bid to $17, but that's only because shares of Reader's Digest had bounced back and were trading above $14 by mid-October.

The filing notes that if the buyout is approved, Goldman Sachs will receive an $11 million banking fee for its effort. Given the way the tortuous negotiations with Ripplewood evolved, Reader's Digest shareholders can only wonder whether the bankers earned their fee.