The sale process is at an early stage, and Morgan Stanley and Guggenheim are advising. Neither firm has confirmed the process.
A sale that values a company at more than $10 billion needs a buyer that can write a very large check. The first question about IntraFi is how big that check is relative to what it earns.
Blackstone and Warburg Pincus are exploring a sale of IntraFi at a valuation of more than $10 billion, according to a report on Tuesday that cited people familiar with the matter. Morgan Stanley and Guggenheim are advising on the process, which is at an early stage. The people said IntraFi generates about $630 million of annual EBITDA.
The multiple
Dividing a valuation of more than $10 billion by $630 million of EBITDA gives a multiple of about 15.9 times, or more if the price exceeds $10 billion. The report did not say whether the figure is an equity value or an enterprise value including debt, and it did not say which EBITDA measure the sources used, so the multiple is an approximation.
For a business owned by two sponsors, a multiple near 16 times sets a high bar for the next buyer. A buyer paying that price needs growth, a long holding period or a lower financing cost to earn a return, and few buyers can write a check above $10 billion.
An early-stage process
The report describes an exploration, not a launched auction. Many such processes end without a transaction, particularly when buyers' views of price diverge from sellers' expectations.
Neither Blackstone nor Warburg Pincus has commented on the report.
Two readings
One reading is that sponsors are testing the market for very large exits. A valuation above $10 billion would require a buyer with very large resources, and the exploration suggests the owners see a window.
The other reading is that the process is far from a transaction. It is early, the figure is a reported expectation, and the price implied by $630 million of EBITDA leaves little room for a buyer to disappoint.
What to watch
Any statement from the owners; the appointment of additional advisers or a launch of a formal process; the names of potential buyers; and the valuation basis. Blackstone's third-quarter report on Thursday, Oct. 22, may offer comments on exits. A formal launch with named bidders would signal that the process is moving beyond exploration.