January 17, 2013
MBOs and Dell's opportunity
Dennis Berman at the WSJ has a piece at WSJ.com that asks the right question about the now simmering Dell going private transaction. Who is Dell working for?
Management buyouts are always fraught, precisely for this reason. Prodded by court rulings, boards have taken steps to minimize the most flagrant problems. Should a deal be announced, be prepared for a barrage of reminders about "independent committees," "go shops" and the like.
But these steps are ultimately cosmetic. No one will say it this way, but it's the way deals happen: The conflict is the opportunity.
For example, without Mr. Dell's stake, it would be nearly impossible to assemble the $22 billion to $25 billion needed to buy the company. It's also unlikely that another buyout shop or industry player would make a competing bid without Mr. Dell's consent.
In these situations, a powerful executive like Mr. Dell can effectively act as his own poison pill, guarding against outcomes he doesn't like.
Make no mistake. Once this deal is announced there will be multiple suits. So of course, the lawyers are being attentive to the requirements. But if the J Crew transaction from last year is any guide the deal will pasts muster. However, these going private transactions always raise a question with me. If Dell (or whoever is the continuing management) have such good ideas about how to run the company, why don't they just go ahead and implement them now for the public shareholders? Why keep all the good ideas and strong management for when the business goes private? It's a question without a real answer.
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