Priviate Equity firms sour over Harman International

Things aren't looking so rosy over at Harman International, where it was reported last April that KKR and Goldman Sachs were going to take the electronics company private in an $8 billion buyout.

Reports yesterday claim that the two firms are looking to weasel out of the deal.

CNN: Equity firms back out of Harmon buyout

A person familiar with the negotiations who asked not to be named because he was not authorized to speak publicly told The Associated Press that the private equity firms sought to squash the deal over questions about Harman's financial health, not because of any financing difficulties in a tight credit market. The person said the effort to back out was not a negotiating tactic.

In an email from a source close to Harman, I was told that it had more to do with Harman's lackluster financials over the last two quarters, affirming the AP story.

Personally, I'm inclined to favor a combination of factors. I expect the tightening market for collateralized debt to have had an impact on making the deal look less sweet all of a sudden. If KKR and GS couldn't find anybody to unload the debt on, they might have had second thoughts about getting into the electronics business.

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