Even Fidelity, said to be a supporter of the buy-in attempt, would baulk at 130p a share cash, and as for the alternative of 86p in cash and a share of the stub equity, that was just a joke. ITV must surely be worth more than this. Whatever the price required, the Dyke consortium was incapable of offering it.
Private equity makes its return by gearing companies up with debt. The company is then squeezed until the pips squeak in an attempt to service and pay off the loans. Investment in the future is slashed, prices are raised, costs are axed and customer service plummets. OK, so I'm painting private equity as the bogeyman, but deservedly so in many respects. The German depiction of private equity as a plague of locusts stripping the country bare is not so far from the truth. In servicing the debt, private-equity owned companies tend to get stripped down to the last lightbulb.
ITV was in truth never an appropriate candidate for such treatment, if indeed any company is. Laughably, the consortium tried to pretend that, as in other private equity deals, part of the debt could be defrayed by selling off the assets. The head office at Gray's Inn Road was identified as a suitable candidate for sale. As it turns out, the building was sold eight years ago and is now rented. Likewise, the regional production units were identified as a waste of money, and therefore an easy cut. Er, actually, they were closed ages ago.
Mr Dyke's consortium couldn't have gone any higher with its bid because the whole endeavour was already risky enough. The proposed leverage of 7 times last year's cash flow was too high for a cyclical business with such high operational gearing, where a 1 per cent change in top line revenues makes a 6 per cent difference to the bottom line.
All it would require is another recession in the advertising market, and the whole endeavour would have gone bust. As can be seen, it has been hard enough for Mr Dyke's consortium to make even the numbers as proposed stack up. Any higher would have been well nigh impossible.
Which rather leads you to wonder why Mr Dyke and his backers tried it on in the first place. Was this just hubris on Mr Dyke's part, an intended act of revenge from a man still bitter after all these years over the way the ITV chief executive, Charles Allen, toppled him from his perch at London Weekend Television? Surely not. Mr Dyke was angry at the time, but he came out of that escapade a rich man and he would never have got to be director-general of the BBC but for being ousted at ITV. Then again, the BBC turned out to be a poisoned chalice for Mr Dyke.
Whatever. Mr Dyke is a brilliant impresario, but one thing he is not is a cost cutter. The business plan, on the other hand, envisaged an extraordinarily aggressive 25 per cent cut in the programming budget. Bizarrely, Mr Allen, previously thought of in TV circles as the cost cutter from hell, began to look saintly by comparison. All of a sudden he was the blue-eyed boy of the production houses, and the chummie Mr Dyke was the Dark Lord of Mordor.
Small wonder that there was a falling out in the bidding consortium. By the end, Apax, Goldman Sachs and Blackstone were fighting like so many cats in a sack, and as generally happens in consortium bids, the whole thing came apart at the seams. There was a difference of style and approach between the three that all along made a successful conclusion quite unlikely. Disgusted, Mr Dyke went skiing. He was on the slopes for the ignominy of yesterday's retreat. Best place to be.
There was something distasteful about the £200m in advisory and refinancing fees - half of ITV's annual profits - which would have been involved had the transaction been successful. For such a high-profile company to be pillaged in this way left a nasty taste in the mouth.
The endeavour has also raised afresh a growing concern in corporate Britain about the antics of Goldman Sachs, which seemed to be acting as an adviser, principal investor, putative underwriter and lender to the bidding consortium. It's surely only a matter of time before the American investment bank's growing hegemony will find its people both bidding for and defending the same company. Goldman seems to have a finger in every pie, and take a fee from every part of the transaction, in a way which would have been thought quite unacceptable just a few years back.
Some City observers are already citing ITV as the deal too far, the point of wild exuberance that comes to symbolise the froth at the top of a prolonged bull market. I know what they mean, but I cannot agree. In this case, there is one vitally important, missing ingredient - a mad valuation.
If Mr Dyke and his partners had bid 200p a share, then it certainly would have been the deal too far. They'd have got the company but lost their shirts. As it is, this was a rather grubby little affair - put simply, just an attempt to steal the company on the cheap. Sir Peter Burt, the ITV chairman, was right to have no truck with it.
Carphone: roll up for free broadband
A new front in the broadband price war is about to be opened up by Carphone Warehouse with the launch of a totally "free" service. No, this is not another April Fool, though as ever when things are described as "free", it is not what it seems.
The proposition, due to be announced on 11 April, is one megabyte of unlimited free access for three months, at which point a charge of £4.99 a month is imposed. The other slight fly in the ointment is that you have to be signed up to Carphone's Talk Talk telephone service, which carries a line rental charge of £9.99 a month.
None the less, this is quite an improvement on almost anything else in residential broadband and as such is likely to prove a highly disruptive force in the market. Few others are in a position to offer anything similar at such limited cost to themselves. Carphone's extensive network of high street stores gives it a pre-existing and largely cost-free method of customer acquisition. The ability to cross sell between mobile, fixed line and broadband gives a further point of competitive advantage.
Carphone plans to "unbundle" some 1,000 BT exchanges over the next two to three years by installing its own equipment in them. Again, this further reduces the break-even point relative to rivals of servicing broadband customers. With still only about 40 per cent of UK households signed up to broadband, there's a very substantial landgrab still to take place.
Whatever happens, British Telecom will remain a major player. Its new router, also likely to be given away "free" from the summer onwards on some of the higher capacity packages, offers genuine innovations which ought to give BT the edge in certain sections of the market.
It's impossible to imagine that BSkyB, which recently acquired easyNet as a way into the broadband market, won't be a leading player too. The opportunity to bundle broadband in with fixed line telephony and pay-TV provides BSkyB with a unique competitive advantage. Presumably, cable will continue to be a major force in the market, though given cable's past propensity to mess things up, I wouldn't be entirely sure of this.
Yet it also seems clear that Carphone will be right up there with them. What's more, unencumbered by the legacy costs of a telecoms network, it can expect to be profitable on very low levels of average revenue per subscriber. For Charles Dunstone, the chief executive, broadband promises to be a whole new entrepreneurial adventure. This ability to reinvent himself marks Mr Dunstone out as one of the most outstanding business leaders on the UK scene today.Reuse content