M&A Roundup: Goldman's Golden Quarter, Sabre Sells Out, Harrah's Cash Call

Goldman Prints Money: It was really no surprise—Goldman Sachs (GS) had a stunning fourth quarter. Profits skyrocketed by 93% to $3.16 billion. It was a record quarter. It was a record year.

Traditionally, the company made its money from investment banking activities. But that has changed over the years; that is, the growth has come from trading in equities, commodities, fixed income and derivatives.

Although things are looking pretty good in terms of reaping big gains from M&A, LBOs and even IPOs. For example, the company had a huge payday from its investment in Industrial & Commercial Bank of China Ltd., which recently went public. The firm also was the adviser on Mittal Steel Co.'s $38.3 billion buyout of Arcelor SA.

In fact, according to Goldman's CFO, the backlog for deals is the highest since 2000.

Booking a $5B Deal: The rumors proved true – Sabre Holdings (TSG) sold out. The buyers include two private equity firms, Texas Pacific Group and Silver Lake Partners. The price tag is $5 billion or so (if you include the $550 million in assumed debt).

The stock price increased about 5% to $31.96 on the announcement (yes, traders bought lots of stock on the rumor).

Sabre is a legend in tech. American Airlines (AMR) started the operation in the 1960s so as to better automate ticket reservations. Since then, the company has evolved – such as with its travel portal, Travelocity.

However, the travel-reservation business has a hazy future. But, then again, private equity firms don't necessarily invest in growth companies; rather, they want good values. And, simply put, Sabre generates lots of cash flows – and probably should for several years. In the meantime, there is likely to be lots of cost cutting.

Pearson Dumps the Government: Pearson PLC (PSO), which is a large educational publisher, sold-off its Government Solutions Unit for $560 million to a private equity firm, Veritas Capital. Actually, it was a non-core part of the business. And, with the cash, Pearson can go on a spending-spree for educational assets (or perhaps websites).

Then again, Pearson is hedging a bit: it has retained a 10% interest in the unit.

Northwest Flying for a Buyout: The beleaguered Northwest Airlines (NWACQ.PK) announced that it has hired the investment bank, Evercore Partners. Perhaps, this could be the prelude to a merger.

The airline sector has seen some deal rumbling lately - such as US Air's (LCC) approach on Delta (DALRQ). Also, Northwest's creditors probably want to be a part of the dealmaking action. Besides, Northwest has some valuable routes in the Asian-Pacific region.

If a deal gets done, Evercore will bag a fee of $2 million. Oh, and there was also a $275,000 upfront payment and a monthly retainer of $75,000.

EMI's New Tune: According to the Wall Street Journal, it looks like the world's third largest music company, EMI Group (EMIPY.PK), is on the verge of a buyout. And, yes, the buyer is a private equity firm: Permira Advisers LLP.

The stock has been surging, of course. While EMI has a lot of debt, the company also has a lot of cash flows.

The Harrah's Cash Call: It seems like this Harrah's (HET) deal is getting stale. But, private equity firms have a lot at stake - and certainly want to push things forward. So, it looks like we may see some progress this week because the board of Harrah's plans to meet on Wednesday.

It seems there are two bidders: one group includes Apollo Management and the Texas Pacific Group; the other includes Penn National Gaming and D.E. Shaw, which is a hedge fund.

Don't expect a bidding war (these groups don't like to do this).