Deal spotlight: Greenfield Online

Three weeks ago, most everyone assumed that Quadrangle Group’s agreement to buy media services company Greenfield Online was a done deal. It had a standard go-shop provision, but conventional wisdom says that those rarely go anywhere. And, besides, Greenfield’s stock was trading at a relatively small spread. Business as usual.

Then, Microsoft upended the transaction with a superior offer that Quadrangle was unable to match.

All along, ZM Capital was behind the scenes, plotting a rival bid, for almost a year.

The saga started in October 2007 when ZM Capital—which invests in media and entertainment companies from offices in New York and Los Angeles—approached Microsoft to explore a potential joint bid. ZM Capital wanted Greenfield’s Internet survey solutions business, and the firm convinced Microsoft it could benefit from owning Greenfield’s comparison shopping solutions business.

In January, the parties approached Greenfield and began preliminary talks. By March, Greenfield admitted it’d been seeing other suitors. Including the Microsoft-ZM Capital team, the firm received four formal IOIs.

But Greenfield wanted a simple transaction, with only one buyer, so Microsoft took the lead, agreeing to sell ZM Capital the surveys business in the aftermath.

After repeated indications of interest and two weeks of due diligence, Microsoft had not been given a chance to make a bid. Without warning, Greenfield announced its agreement to sell to Quadrangle for $15.50 on June 16.

On Aug. 4, the final day of the deal’s 50-day go-shop, Microsoft topped Quadrangle’s bid by $2 a share. The financing contained no contingencies, since it would consist of a “back-end merger of a subsidiary of Microsoft’s into Greenfield,” according to a regulatory filing.

After a few weeks of discussions, Microsoft put the pressure on Quadrangle, giving the firm two days to match its offer. It is unclear if they matched, but the Greenfield board picked Microsoft, which cost $5 million in termination fees to Quadrangle.

In the end, everything worked out as planned, and Microsoft didn’t reneg on their promise to sell the survey business to ZM Capital, as that deal was announced late last week in an undisclosed amount. Microsoft, though, bought Greenfield for $486 million.