NEW YORK ( TheStreet) -- With M&A starting to pick up a bit, we thought it might make sense to take a look at some of the planned buyouts from the deal boom that fell apart when the housing crisis hit in 2007-2008 and try to determine if any of the rumored targets could end up back on the block. >>>>Click here to see the biggest M&A deals of 2007 There's already been an example, as Xerox ( XRX)'s recently completed acquisition of Affiliated Computer Services -- a company originally targeted by Cerberus Capital Management before the hellhounds suddenly lost their appetite in October 2007 -- suggests the past may in some cases be prologue. Once a company has been put in play, the likelihood it comes up again as a potential target would seem to be significantly increased. Assuming the key executives and board members are still in place, everyone now knows they are open to a deal. And if willing buyers were out there when the company was in many cases twice as expensive, why not now? The problem, in most instances, is the lack of lenders ready to stand behind the buyers. Still, financing is available, and independent companies, known is dealmaker circles as "strategics," need less of it than the private equity firms that dominated the last deal boom. Indeed, it is difficult to raise enough debt to finance a big leveraged buyout these days, though not impossible. In a recent interview with Bloomberg television, The Carlyle Group boss David Rubenstein said $10-20 billion deals are pretty much off the table. While he sees room for a $4-6 billion buyout, he says such a deal typically requires 50% or more of the money to come in the form of equity, versus about 35% three years ago. Some expect that could change as soon as a year from now, meaning strategic buyers may be in a hurry to get deals done before the financing window opens again for the big buyout firms like Carlyle, Kohlberg Kravis Roberts & Co. and The Blackstone Group ( BX). The slideshow that follows looks at some prominent acquisition targets that were on the table before the markets seized up, and their prospects for being sold today.
SLM Corp. ( SLM):
The parent of student lender Sallie Mae was supposed to be bought for $25 billion by JC Flowers & Co., JPMorgan Chase ( JPM) and Bank of America ( BAC). But the buyers began backpedaling in July 2007, arguing that new laws cutting subsidies to private student lenders meant they were no obligated to go forward. The deal was officially over by January of the following year. Sameer Gokhale, analyst at Keefe, Bruyette & Woods, says Sallie Mae's student lending relationships and capabilities would be attractive to many potential buyers. However, he thinks a potential buyout is quite a ways off. Large banks are still more interested in cleaning up their balance sheets than making new loans, and buyout firms can't raise enough debt to get a such a large deal done right now. Another obstacle to a deal, Gokhale says, is the threat that the government could take away the federal backing Sallie Mae enjoys for loans made under the Federal Family Education Loan Program (FFELP), which has been highly profitable for the lender. Gokhale thinks Sallie Mae is worth $14 per share-- more than 20% about where it was trading mid-Thursday--even without FFELP, but says valuing the company is a difficult task as long as FFELP's status is up in the air.
Penn National Gaming ( PENN):
Penn National, an operator of various types of racetracks, was supposed to be sold for $6.1 billion, or $67 per share, to Fortress Investment Group ( FIG) and Centerbridge Partners. Even before that deal was finally called off, in July 2008, the shares were selling for less than half that price as the market clearly saw what was coming. Gambling companies rallied strongly after the tech bubble burst, but things are different this time around. The geniuses who were borrowing against their houses and blowing those monies betting on the greyhounds at company properties like the Sanford-Orlando Kennel Club in Longwood, Fla. don't get to do that anymore, as there's a good chance most of them have lost their houses by now. Making things worse for companies like Penn National, the small number of people with money left to gamble have more racetracks and casinos to choose from than ever before. Jefferies & Co. analyst John Maxwell says gambling companies don't want to sell themselves on the cheap, so he expects few if any acquisitions in the sector for the foreseeable future.
Huntsman Corp. ( HUN):
Huntsman was one of the few jilted buyout targets that got some measure of recompense after being left at the altar. The chemical manufacturer won a $1.7 billion settlement from Deutsche Bank ( DB)and Credit Suisse ( CS) after the banks refused to fund a $28 per share acquisition by Apollo Management and Hexion Specialty Chemicals. But with Huntsman shares at around $13, investors in the chemical manufacturer can hardly be thrilled about their lot. Jefferies & Co. analyst Laurence Alexander says consolidation in the chemical sector will continue and Huntsman will remain attractive to larger players. That said, he argues hostile deals are a rarity in the sector, and friendly ones take a long time to get done because they are so dilutive for the acquirer.
PHH Corp. ( PHH):
This odd coupling of businesses -- one that takes care of fleets of company cars in industries such as pharmaceuticals that don't care about cars and the other a mortgage servicer -- was set to be split up and sold for $31.50 per share to The Blackstone Group ( BX) and General Electric ( GE) until the deal came apart in January 2008. Sam Johnson, portfolio manager at Merion Investment Management, thinks General Electric, the industry leader in fleet management, would be happy to take another crack at buying that business from PHH, the number two player. Paul Miller, analyst at FBR Capital markets, thinks a spin-off or sale of PHH's fleet management business is likely once it is operating at full tilt. At the moment, however, PHH management has indicated the unit's access to funding is still somewhat limited.
BCE Inc. ( BCE):
At $C34 billion, the planned buyout of Canada's largest telecom by the Ontario Teachers' Pension Plan and a pair of buyout firms was one of the largest failed deals of 2008. Massive cost cuts (the company laid off 10,000 vice presidents) and stock buybacks have the company back on track, with EBITDA expected to rise in 2010 (see above chart) and the stock trading near a 52-week high, though the shares are still well below the $C42.75 per price that had been agreed upon. CIBC analyst Robert Bek believes selling itself is nowhere on the agenda of BCE's board at the moment. It is more likely to be an acquirer as it looks to reduce its reliance on wireline customers, who still account for two thirds of its business. Bek believes a long-rumored megadeal with TELUS ( TU), which dominates the western Canadian market is likely. Deal combinations of all kinds now look more plausible as Canada's parliament indicated this week it will look at relaxing foreign ownership restrictions. Bek says Canada is way behind most other countries on this issue, and he expects little opposition. Still, it could take five years before the rules are completely unwound. In the meantime, though, he is looking for consolidation among Canada's telecom companies as they look to position themselves ahead of the expected influx of foreign investment. -- Written by Dan Freed in New York.