So you are set on taking your company private. Well, before you put your plans in motion, there are a lot of risks and potential consequences to consider along with the benefits. At the moment, no one knows this better than Michael Dell, CEO of Dell Inc.
Back in February 2013, Mr. Dell and his financial partner, Silver Lake Management LLC, entered into a merger agreement with Dell that would make Dell a private company. The merger was valued at $13.65 per share, with a deal value of $24.4 billion. The deal would keep CEO Michael Dell and others in his investment group in charge of the company.
The driving force behind the deal is the perceived need to restructure Dell due to fundamental changes in the computer industry. Consumers are focusing more on tablets and smartphones, which is hurting Dell’s core computer business. The thought is that the company needs a couple years to restructure and that being a private company would allow the restructuring to occur without so directly impacting the price of the stock. Since most investors these days have shorter time horizons and less patience for restructuring, this looked like a smart move.
As negotiations progressed and the deal was announced, however, the door was opened for other offers because Dell was in play. This is one of the uncertainties involved with a going private transaction and makes this type of deal more risky. In particular, there is the risk that the initial group loses control of the bidding process and gets out bid.
Here, despite initial thoughts that no other parties would top the Silver Lake bid, two additional bids that are arguably superior have surfaced and make the outcome uncertain. One of these bids is lead by investor Carl Icahn and the other is lead by Blackstone. Both bids were deemed by Dell’s special committee to be potentially
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