R.R. Donnelley's $7.4 Billion Print Job

As I indicated in a recent BloggingStocks.com post, expect a slew of mega M&A deals – as private equity funds have huge amounts of capital to play with.

Well, according to a report in the Wall Street Journal, it looks like the venerable printer, R.R. Donnelley & Sons Co., is in play. And, of course, the offers are in the ten-digits.

Actually, R.R. Donnelley is an ideal target for a buyout. That is, the company has a strong position in a relatively stable industry (hey, the company has been around since 1864). This certainly makes it easy to pay-off the debt, which is required to make these deals happen (the company pumps out over $1 billion in annual cash flows). Also, the stock price has been lackluster this year, making the valuation relatively attractive.

Apparently, there are two groups interested in R. R. Donnelley. The first group consists of Carlyle Group, Madison Dearborn Partners and Thomas H. Lee Partners. The other includes the Blackstone Group and Texas Pacific Group.

The deal would have a value north of $7.3 billion.

However, do not expect a bidding war. So far, in these big deals, private equity firms have been restrained. In fact, if the deal gets too rich, these firms have typically used the strategy to "just say no." Maybe Wall Street does, in some cases, learn lessons from the past?

Tom Taulli is the author of various books, such as the Complete M&A Handbook (Random House) and operates InvestorOffering.com.