Deals and IPOs

An Oops for Goldman Sachs in Its Advice on Vista-Tibco Merger

David Gelles

When Vista Equity Partners last month decided to acquire Tibco Software, an enterprise computing company, it agreed to pay $4.3 billion, making the deal the largest technology buyout of the year.

But it turns out Vista will only wind up paying about $4.2 billion for Tibco.

The $100 million gap is a result of a mistake made by Goldman Sachs, the financial adviser to Tibco.

Traders work at the Goldman Sachs booth on the floor of the New York Stock Exchange.
Peter Foley | Bloomberg | Getty Images

According to a filing with the Securities and Exchange Commission, a mix-up with spreadsheets during the final days of negotiations led Goldman Sachs to misrepresent to Vista the number of outstanding shares in Tibco.

Vista made its bid based on the number of shares Goldman Sachs said were outstanding in the company, offering $4.3 billion, or about $24 a share, and beating out other bidders.

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But it turns out Goldman Sachs had double-counted some shares as both common stock and equity awards. That inflated share count was used in Goldman's financial analysis of the deal, and used to calculate the headline number put out in the press release.

Instead, Tibco actually has a smaller number of shares outstanding. That means when Vista ultimately closes the deal, it will be paying that same $24-a-share price, but on a smaller number of shares than it originally thought. As a result, Vista will pay about $100 million less than it originally expected.

The gaffe came to light only after the deal was announced. "After announcement of the transaction, it was discovered that Goldman Sachs had used the overstated share count," the S.E.C. document said.

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Once that happened, Goldman Sachs revised its fairness opinion, and determined that even if shareholders were getting $100 million less than originally thought, they were still getting a good deal. Tibco's board also met again, and decided the deal was still in the best interest of investors.

For Robert F. Smith, a former Goldman Sachs banker who now runs Vista, the mix-up is a welcome development. For Tibco shareholders, it means they will get a little bit less than originally expected. And for Goldman Sachs, known as one of the most sophisticated financial advisers on Wall Street, the screwy spreadsheet marks an embarrassing and costly addition error.

Goldman Sachs, Vista and Tibco all declined to comment.