The Gap Inc. (NYSE:GPS) shares jumped more than 7% during yesterday's trading session to settle around $20.25. The move comes after several sources noted that the troubled company has hired Goldman Sachs to look at possible strategic alternatives, which may include a sale of the company. It is unclear whether there is substance to this story; however, the company did admit that it had a relationship with Goldman Sachs, but not necessarily in that regard.

The rumor of a Gap buyout has been alive for more than two years, with our most recent coverage taking place on December 7th. Since then, investors have continued to be disappointed with the company's lackluster performance during the holiday season, after the company said the poor sales would "severely" affect earnings. Then came the comment from Pressler that caused the speculation, "Given that we did not gain the traction that we had expected, the management team, with the active involvement of our board of directors, is currently reviewing Gap's and Old Navy's brand strategies." Moreover, investors continue to be upset over the CEO's 100% raise last year, while the company's stock continues to suffer losses.

There are, however, a few barriers to any leveraged buyout. First, the company's founder, Donald Fisher, and his family still own approximately 36% of the company, and they are not exactly keen on selling it. Secondly, many investors note that this acquisition would be a huge one, amounting to around $20 billion, which may put it out of the league for many private equity players. And finally, with the company's disappointing performance, it could take awhile for any suitor to turn around the company and make money on the deal. Rather, many believe that the CEO will be fired before any drastic strategic alternatives are implemented. Regardless, this is definitely a company to keep an eye on during the next few months.

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