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Value of Credit Information: TransUnion Sold for 3x Revenue in the Largest Leveraged Buy-out Deal of the Year

The Pritzker family and Madison Dearborn are Selling TransUnion:  After several years of trying the Pritzker Family finally made their exit from TransUnion.   According to Bloomberg the Goldman Sachs Group Inc. (GS)’s buyout unit and Advent International Corp. acquired TransUnion from Dearborn Partners and the Pritzker family.   Dearborn Partners had acquired 51% equity in TransUnion from the Pritzker family in 2010.  At that time the deal was valued at US$2bn.  The deal with Goldman Sachs’ GS Capital Partners and Advent International, values Chicago-based TransUnion at more than $3 billion. 

TransUnion’s 2011 revenues were $1.02 billion thus earning a 3x revenue multiple for the sellers.  Bobby Mehta, the company’s chief executive officer, and the rest of the leadership team will remain with TransUnion.   

“The conversion of cash to plastic is an unstoppable, global trend and several markets would be well served by a credit bureau like TransUnion,” said Philip J. Philliou of New York-based Philliou Partners, a consultant for the payment industry.  “Global expansion has got to be part of Advent’s investment thesis.”   

There is some truth to that as cash based countries such as India and China are under immense pressure to reduce the reliance on paper money because of counterfeiting and the cost of printing paper money. These are the potentially the largest markets for credit information, however there are country specific constraints.  India limits foreign ownership in credit bureaus to 49%.  TransUnion has a minority equity stake in CIBIL, the oldest of the four credit bureaus in India.  China is currently off limits for private sector credit bureaus, perhaps this will change over time.

Geographic diversification is certainly a key for future growth.  Second in line of importance are analytics and workflow tools.  TransUnion has recently entered Brazil by acquiring Crivo SA, a leading decisioning and analytics firm.  If the new owners provide TransUnion management with the latitude of making similar deals elsewhere it will most certainly bring new dynamics to the business of consumer credit information.

Source:   Bloomberg News  –  Chicago Tribune  –  BIIA editorial comments

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