In a move reminiscent of the blockbuster buyouts of the late 1980s, seven private investment firms acquired

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In a move reminiscent of the blockbuster buyouts of the late 1980s, seven private investment firms acquired 100 percent of the outstanding stock of SunGard Data Systems Inc. (SunGard) in late 2005. SunGard is a financial software firm known for providing application and transaction software services and creating backup data systems in the event of disaster. The company's software manages 70 percent of the transactions made on the Nasdaq stock exchange, but its biggest business is creating backup data systems in case a client's main systems are disabled by a natural disaster, blackout, or terrorist attack. Its large client base for disaster recovery and back-up systems provides a substantial and predictable cash flow. Furthermore, the firm had substantial amounts of largely unencumbered current assets. The deal left SunGard with a nearly 5 to 1 debt to equity ratio. Why do you believe lenders might have been willing to finance such a highly leveraged transaction?
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