Dell, a very boring computer company, has agreed to be taken private in a $24.4 billion deal led by its equally boring founder, Michael Dell, and a private equity firm called Silver Lake. It’s the leveraged buyout only an IT worker could love.
The deal has been in the works for a while, with various details leaked in the past few weeks, and what came down today largely matches expectations: Michael Dell and Silver Lake will pay $13.65 a share for the company, with money provided as a loan by Microsoft and a consortium of other deep-pocketed institutions. It’s the biggest private equity buyout since 2007 — when Blackstone bought the Hilton hotel chain for $26 billion — and because of its size, lots of reporters are trying to drum up interest in the deal, calling it “drastic” and saying that it has “sparked excitement around Wall Street.”
That is almost certainly an exaggeration. Dell is not an intrinsically interesting company — its PCs are cheap, unremarkable, and not the kind of thing you stand in line on release day to buy. It doesn’t have enticing ads featuring Zooey Deschanel, and many of its customers are huge corporations. Articles about the company contain snooze-worthy sentences like: “Emphasizing data-center products and services has helped Dell stave off margin erosion.”
But lots of boring businesses make money, and Dell — which grew to a market value of more than $100 billion by taking a ruthless, Walmart-like approach to managing its supply chain – is hoping to reverse its years-long stock slide and become one of them. Christopher Mims has a good rundown of how, exactly, it plans to do that, with “thin” PCs on flash drives and an emphasis on cloud computing.
It’s also worth remembering that Dell succeeded by coming up with some of the dirtiest tricks in the corporate playbook — including massive outsourcing, a hugely complex tax-avoidance scheme, and a practice of fraudulently padding its quarterly earnings that got it fined $100 million back in 2010.
Michael Dell has billed a leveraged buyout as a way to regain control of his company and allow it to try new strategies without having to answer to public investors. And that’s true. What’s also true is that being private will give Dell far less scrutiny as it attempts to revive its struggling sales figures. Which could mean that, corporate-ethics-wise, this company is about to become a lot more interesting.