Why dell going private

How Michael Dell played the game and saved his company from the brink. The first reports broke over five years ago: Michael Dell was planning to take his eponymous technology company off the public market. The news came after a particularly bad year for Dell. Revenue in was down 7 percent year over year, and profits were tumbling. It was becoming clear that changes had to be made if Dell was going to survive.

Dell and his investment partners at Silver Lake transformed the company from a struggling consumer electronics company into an enterprise powerhouse. That all changed with EMC. Dell didn't lose a single large customer during the choppy waters of the past year. In fact, some of its large clients drafted contingency plans in case Mr.

Dell would no longer be the CEO. Imagine the progress that can be made when Mr. Dell holds the reins and is only responsible to the primary shareholder, himself. Reason 2: Less paperwork, more productive work As a private enterprise and unlike its primary competitors, Dell is not required to meet shareholder or analyst expectations.

Plus, the company can forego quarterly or annual filings with the SEC, expensive IR associated costs, and dividend and buyback measures, among other processes involved with being a public company. Assuming Dell spent the same amount on dividends and buybacks as it has the past 5 years, this cash flow would exceed the monthly interest payments to the banks that lent cash to Dell for the buyout.

That equation is pretty good, especially considering the potential future dividend increases had it stayed public and the extra cash it will have to invest or pay down additional debt.

Dell's vision to transform his company into a global powerhouse that emphasizes customer needs and a long-term time horizon. Grow fast and generate cash. So, let's run some numbers. According to Mr. News U. Politics Joe Biden Congress Extremism. Special Projects Highline. HuffPost Personal Video Horoscopes. Follow Us. Terms Privacy Policy. It's easy to forget now, but Michael Dell was the Mark Zuckerberg of his time.

Hailed as a young genius, he created the inexpensive, made-to-order personal computer in his dorm room and peddled it to the masses, but now the PC is being eclipsed by smartphones and tablet computers, and Dell is trying to save his company.

Terrill, FIle. Dino Grandoni. Lawyers and advisors weighed in while the special committee sussed out the challenges to Dell's business. There were many. They included the "significant" weakness in the PC market PC shipments are expected to drop 8.

At the same time, Dell saw soaring demand for tablets, which it sells only in limited supplies, and smartphones, which Dell doesn't manufacture at all. Dell was also seeing lower returns on its acquisitions than management had anticipated. For his part, Michael Dell pledged he would participate with "whatever sponsor was willing to pay the highest price.

On Dec. He told the board that "fully implementing" the plan to shift from PCs to enterprise solutions would take another three to five years. It would also take more money, a big concern since there were questions about whether the cash flow from the dwindling PC business would be enough to finance the enterprise expansion.

The board asked private equity firm Texas Pacific Group to bid, but it declined two days before Christmas. By February, with press reports already hinting at the buyout and the special committee convinced there wouldn't be other bidders, Dell and Silver Lake got the go-ahead. Dell Inc. The proposal also included a provision for a day "go-shop" process in which other parties were invited to come courting. Enter Icahn. The veteran opportunist says he got interested after some big Dell shareholders he won't say who called him for help.

In a Mar. Blackstone also sniffed around during the go-shop but withdrew in April, also citing the PC market slump. Throughout the go-private saga, Dell never lost a big customer. That doesn't mean those customers weren't nervous.

A few asked for a change-of-control provision in new contracts if Dell were no longer CEO. Others took "a bit of a wait and see [stance], especially when it got a little bit more turbulent," says Marius Haas, who headed HP's networking business and joined Dell in to run Enterprise Solutions.

When the going got rough, the company sent in its CEO to reassure them that it was business as usual. The billionaire investor used tweets, open letters--headlining one "Let the Desperate Dell Debacle Die"--and media interviews to barrage shareholders with his message that the buyout undervalued the company, and that Michael Dell should be fired and the board replaced. He pushed for a leveraged recapitalization, pressing the company to borrow billions for a stock buyback to buy out investors at a premium and issue warrants for the purchase of additional shares in the future if the turnaround played out.

By the time September rolled around, it was pretty clear that Icahn wasn't a serious threat to derail the deal. Most of the bidding up by Silver Lake and Dell took place in the early going, and Dell says that Icahn never submitted a formal offer after his June proposal. It's not about the people. It's not about changing the world. He doesn't give a crap about any of that. He didn't know whether we made nuclear power plants or French fries. He didn't care.

He points to Icahn's stance that shareholders should have sought appraisal rights--a process by which a judge determines the value of the shares.

This is very complicated. This is years of difficulty. Donald Carty, the longest-tenured member of the board besides Dell, says the going-private transaction was handled "by the book" to make sure shareholders' interests were the priority.

Business schools will study it one day as "a classic case of doing it right," he predicts. Southeastern didn't make out so well, despite kicking off the whole affair. Staley Cates, president of Southeastern.