Michael Dell

Dell Goes Private In $24 Billion Buyout Deal

Michael Dell takes control of the company, backed by Microsoft

On by Peter Judge 0

Michael Dell has orchestrated a $24 billion buyout of the computer hardware and software company he founded.

The move is backed by Microsoft and investment firm Silver Lake, and is the biggest management buyout since the financial crisis started in 2008.  Michael Dell, who owns roughly 14 percent of Dell, remains as CEO with stronger control of the company, and is also putting in more money through his own investment firm MSD Capital. Microsoft is lending roughly $2 billion or around eight percent.

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The deal is intended to give new direction to the company which Dell founded in 1984. Originally a PC maker, Dell is still number three in PCs and has a strong position in servers, alongside a growing software and servicesx busioness, boosted by puschases such as Perot Systems.

Rumours of the buyout began early in January, when Dell was hit hard by the slowdown in the PC market.

Founder and CEO Michael Dell left the company but returned as CEO in 2007 and, since then, has been building Dell’s enterprise IT services through both in-house development and outside acquisition. Dell reportedly told financial analysts in 2010 that he had considered taking the company private – though it was not to be, at that stage.

Analysts believe that Dell has solid prospects, and would be better off backed by private equity, than by the short-term vision of share-owners on Wall Street. “Michael Dell has been looking to run the company with a long view, and Wall Street is very impatient with that,” said Roger Kay, principal analyst with Endpoint Technologies earlier in the process. “In private equity, they’ll wait 10 to 15 years for payback.”

Dell has a market capitalisation of around $19 billion (£12bn), and generated more than $42 billion (£26.5bn) in revenue and $1.8 billion (£1.1bn) in income during the first three quarters of last year.

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Peter Judge
Author: Peter Judge
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