SunGard's 10-year squeeze

Six wealthy corporate buyout firms -- Silver Lake Management, Bain Capital, Blackstone Group LP, Goldman Sachs Group, KKR, Providence Equity Partners, TPG Capital -- and senior managers paid $11 billion (including about $3.6 billion in equity, the rest of it borrowed) to buy Wayne-based SunGard Data Systems from its stock-market shareholders in 2005, the biggest leveraged buyout in years.

Ten years later -- several years longer than buyout guys and their clients, including Pennsylvania's state pension funds, like to wait for their profits -- SunGard's main financial-software business group, whose sales have been flat and profits neglible to negative under private-equity control, was sold last week to Florida-based Fidelity National Information Services Inc. for about $5 billion in cash and stock and $4 billion in assumed debt. Local administrative job cuts to follow.

Was it worth the expense and the drag on SunGard's once-healthy prospects? After backing out the debt -- the deal leaves SunGard owing $11 billion --  the private equity firms "will reap a $2.2 billion gain" from the sale, including more than $700 million they already paid themselves as a dividend in 2012 (the year they sold SunGard's former college software business), according to Bloomberg LP's David Carey, who cites an unnamed "person with knowledge of the matter."

Roughly, that works out to 5% a year over the life of the deal. All those smart PE firms' clients would have done better to put their money in Vanguard 500 stock index funds.

Of course, the PEs themselves made out somewhat better: they have been collecting additional money-management fees from their clients for watching SunGard's margins deteriorate all those years.

Still in play: Sungard AS (Availability Services), the company's original computer backup and reliability business, spun off from Sunoco in the early 1980s. The group had hoped to sell the unit for $2 billion, then separated it from SunGard Data last year amid fierce cloud-based competition.