The deal announced on Tuesday came as no surprise to anyone in the technology industry, but the ripples of this deal will go on for some time. Microsoft’s involvement cements Dell and Windows for the foreseeable future, debunking thoughts that we may see Dell aiming R&D efforts on Android or other 3rd party operating systems. Some institutional shareholders have expressed disappointment at the price paid – $14 a share was seen as a magic number for some, but at this point should the deal fail, the share price could well fall back to c. $10.
Egon Durban, a Silver Lake Managing Partner, said: “Michael Dell is a true visionary and one of the preeminent leaders of the global technology industry,” said “Silver Lake is looking forward to partnering with him, the talented management team at Dell and the investor group to innovate, invest in long-term growth initiatives and accelerate the company’s transformation strategy to become an integrated and diversified global IT solutions provider.”
So what will Dell do? It’s assumed that Michael Dell will give the firm he founded in 1994 some entrepeneurial spark. Dell has chosen a good partner in Silver Lake who were involved in the turn around of Skype over three years, a restructuring that trebled the value of Skype before being sold to Microsoft for $8.5 billion.
Dell saw themselves caught flat-footed by the rise of mobility – iPad and Android tablets created a new market and impinged on Dell’s share of technology spend with Dell’s existing customers. Dell though, were never a technology leader, but an innovator instead in its business model. Over the last couple of years Michael Dell certainly does appear to be be going the IBM route, rather than the Apple route; focusing on higher margin services rather than hardware and walled-garden propriertary services. And yet, Dell could well benefit from the rise of mobility and BYOD with their ownership of SecureWorks and, despite carrying significant debt of c $19 billion after the deal, there are potential acquisitions of firms focussed on MDM, infrastructure and end-point management. The field’s open for Michael Dell now, no shareholders or analysts to worry about every 12 weeks, giving Dell the freedom to focus on creating value in what is now, one of the industry’s most interesting private companies.
“Dell Inc. today announced it has signed a definitive merger agreement under which Michael Dell, Dell’s Founder, Chairman and Chief Executive Officer, in partnership with global technology investment firm Silver Lake, will acquire Dell. Under the terms of the agreement, Dell stockholders will receive $13.65 in cash for each share of Dell common stock they hold, in a transaction valued at approximately $24.4 billion. The price represents a premium of 25 percent over Dell’s closing share price of $10.88 on Jan. 11, 2013, the last trading day before rumors of a possible going-private transaction were first published; a premium of approximately 35 percent over Dell’s enterprise value as of Jan. 11, 2013; and a premium of approximately 37 percent over the average closing share price during the previous 90 calendar days ending Jan. 11, 2013. The buyers will acquire for cash all of the outstanding shares of Dell not held by Mr. Dell and certain other members of management.”