Cramer's two financial service buyout picks

Posted May 21st 2007 7:50PM by Jon Ogg
Filed under: Private Equity, Automatic Data Proc (ADP)

Jim Cramer came onto MAD MONEY tonight saying he thinks that Total Systems Services Inc. (NYSE: TSS) is one that can be taken over next in a sector and $40 would be a fair price based on Alliance Data prices. Synovus Financial Corp. (NYSE: SNV) is the parent and Third Point is now being an activist investor. The earnings growth of 18% is reason enough to own this. Cramer did note that he is concerned that Automatic Data Processing Inc. (NYSE: ADP) might be acquired first.

Before you trust Cramer, there are some other instances to look at: Alliance Data Systems (NYSE: ADS) was just acquired, First Data Corp. (NYSE: FDC) is going private, and even Bisys Group Inc. (NYSE: BSG) got gobbled up. Keep in mind that some of the premiums in this sector have been small. ADS was nearly a 20% stock jump, but BSG was a horrible low-premium buyout. In making any "buyout projections" you really need to make sure that these stocks are ones you want to own on your own. Picking a company for a buyout just "for the speculation of a buyout" is a strategy that can be more than painful regardless of how nutty private equity deals get.

Tags: ADP, ADS, Alliance Data, Alliance Data Systems, AllianceData, Bisys, Bisys Group, BSG, buyout projections, BuyoutProjections, FDC, First Data, FirstData, Jim Cramer, JimCramer, low-premium buyout, MAD MONEY, private equity, private equity deals, SNV, Synovus, Synovus Financial, Third Point, ThirdPoint, Total Systems Services, TSS