So Guy Hands has lost his epic trial against Citi and the Worm. At stake was a maximum of £1.5 billion (€1.7 billion; $2.4 billion) in damages and both personal and institutional reputations. With the jury's swift decision on Thursday, all that is now moot.
Few observers have been surprised by the verdict. To many, the case was hopeless from the beginning. The question now is: what will this outcome ultimately cost Hands and Terra Firma?
For one thing, there is the ongoing risk that EMI Group could pass into the hands of its lender, Citi. Despite being turned around from an operational point of view, EMI has since day one struggled with its £2.5 billion debt burden, consisting entirely of loans by Citi.
If EMI breaches covenants and the equity is lost, Hands will feel it in his pocket. As revealed in the trial, a big portion of his personal wealth is tied up in the music company. And do spare a thought for Terra Firma's limited partners – their exposure to this deal is massive, too.
And then there is the reputational cost to Hands and Terra Firma. This is a man who has built a private equity firm from the ground up, one which – like others – remains closely defined by the presence and influence of its founder. To many the man and the firm are interchangeable.
It has been suggested that he may find it difficult in future to find any bankers willing to do business with him. More importantly, however (and also more probably), trust is at stake between Hands and the limited partner community. Hands, whose reputation as a dealmaker has undoubtedly been blemished, will now have to convince his investors that even after EMI, there is still life in him – and Terra Firma.
Whilst very difficult indeed, this is not a hopeless case to make. Yes, the €2.2 billion of equity invested in EMI represents an unusually large concentration of capital for the Terra Firma funds, which between them have €7.5 billion of LP money. However, there are eight other assets still in the portfolio, some of them in rude health, according to some of the LPs.
Meanwhile, and crucially, Fund III still has around €2.4 billion to invest. This is far and away his greatest asset now. If he can keep his team intact, Hands will get the chance to make up some ground.
This will require an enormous effort. Those who know him will say Hands has always had an appetite for fights, and the decision to fight Citi in court, however ill-advised, has proved just that. But maybe it was a fight too far. Only time will tell whether Hands has knocked himself out.