2013 Deals of the Year: Dell Privatization Gets Personal

With private equity firm Silver Lake Partners, Michael Dell takes the PC giant he founded off the market for $24.9 billion.


Things haven’t gone as planned since Michael Dell retook the reins as CEO of Dell, the personal computing giant he’d launched from his university dorm room in 1984. Six years after he set out to reinvent his namesake company in 2007, it still needs a face-lift. Buffeted by sliding profits as PCs give way to smartphones and tablets, Round Rock, Texas–based Dell has also lost its position as the world’s No. 1 computer maker, trailing U.S. rival Hewlett-Packard Co. and China’s Lenovo Group.

But entrepreneur Dell isn’t backing down: To avoid the public scrutiny that has thwarted previous restructuring efforts, he teamed up with Menlo Park, California–based private equity firm Silver Lake Partners to take the company private. The $24.9 billion stock buyback closed on October 29.

After Michael Dell first approached them in August 2012, the board of directors formed a special committee to explore alternatives to a management-led buyout, enlisting New York–based JPMorgan Chase & Co. vice chairman James (“Jimmy”) Lee Jr. as adviser alongside colleague Kurt Simon, head of technology, media and telecom banking. Credited with pioneering the syndicated loan market, Lee, 61, has worked on many blockbuster deals, including General Motors Co.’s $23 billion initial public offering in 2010.

2013 Deals of the Year
Jim Renwick & Team
Antonio Weiss & Team
Christian Lesueur & Team
James (“Jimmy”) Lee Jr. & Team
JPMorgan Chase & Co.
Marco Gonçalves & Team
BTG Pactual
Marisa Drew & Team
Credit Suisse Group
Geoffrey Austin & Team
Moelis & Co.
Anthony Noto & Team
Goldman Sachs Group
Adam Taetle & Team
Kenneth Hirsch & Team
Goldman Sachs Group

Besides JPMorgan, a group from New York–based independent investment bank Evercore Partners led by chairman Roger Altman helped Dell weigh its options. Lee decided that the buyout was the best choice because it would deliver the highest price for shareholders and the most certainty of completion while also ensuring that Michael Dell stayed on as chairman and CEO.

The February 5 merger announcement included a cash offer of $13.65 per outstanding share, a 25 percent premium over its stock price on January 11, the day before news of a potential deal broke. An eight-month sparring match ensued, with special committee chairman Alex Mandl in one corner and Michael Dell and Silver Lake managing partner Egon Durban in the other. Activist investor Carl Icahn piled on by claiming that the initial offer seriously undervalued the company, whose stock rose to $14.51, its highest price since May 2012, after the proposed buyout was announced.

When a July 18 shareholder meeting failed to gather enough votes, the deal was postponed. With shareholders abstaining from voting, Michael Dell and Durban added sweeteners at the next two meetings; they got their way on September 12. The company paid $13.75 for each share of common stock, 9 cents below the October 29 closing price, and a special cash dividend of 13 cents per share. Michael Dell’s stake climbed from 16 percent to 75 percent. The absence of other bidders helped Dell seal the deal with a tiny increase in its original offer, but weary shareholders must also have feared a further decline for the stock, which had lost three quarters of its value since its March 2000 peak.


JPMorgan, Evercore and Goldman Sachs Group shared $52 million in fees for advising Dell; the nine banks that represented the buyers earned a total of between $30 million and $40 million.

Bucking the Trend
With these extraordinary closed and pending deals,
our ten rainmakers earned their keep in choppy markets.

($ Millions) *
1U.K. bank Barclays follows a £5.8 billion ($9.1 billion) rights issue with a $2 billion hybrid bond offering.$1832
2Warren Buffett’s Berkshire Hathaway and Brazilian investment firm 3G Capital pay $27.4 billion to take ketchup maker H.J. Heinz Co. private.$97–107
3U.S. telecom Verizon Communications agrees to give Vodafone $130 billion for the British carrier’s 45 percent stake in Verizon Wireless.$93–103
4Founder Michael Dell and Silver Lake Partners privatize U.S. computer maker Dell for $24.9 billion.1$82–92
5Brazilian phone company Oi and Portugal Telecom agree to a $15.7 billion tie-up under the former’s name.$70–90
6Cable giant Liberty Global buys the U.K.’s Virgin Media for $25.5 billion.$882
7Advertising firms Omnicom Group and Publicis Groupe agree to a $35 billion Franco-American merger of equals.$50–70
8Social media company Twitter launches a $2.1 billion initial public offering on the New York Stock Exchange.$682
9China’s Shuanghui International Holdings closes a $7 billion buyout of U.S. pork producer Smithfield Foods.$51–61
10iPhone maker Apple issues $17 billion worth of bonds.$532

* Estimates unless otherwise noted. M&A totals only include advisory fees;
debt and equity totals only include underwriting fees.

1 Deal value provided by Dell.

2 Publicly disclosed.

Source: Thomson Reuters/Freeman Consulting Services.