For whom the Dell tolls
Readers will remember Dell Corporation as a sort of bespoke and amazingly successful desktop computer manufacturer. It was the number one PC manufacturer in the world for 10 years.
But nothing lasts forever. It's all about competition: HP, Lenovo and others were building cheaper and better machines. And HP and Amazon were eating Dell's data storage lunch. Dell responded by taking itself 'private' - its Founder, Michael Dell, and some buddies paid 5 times EBITDA (Earning Before Interest, Taxes, Depreciation and Amortisation) to take it out of the the hands of the public. At that time sales had dropped 8% and profit a somewhat disturbing 32%. And this in the booming tech business.
Well, rather than invest in exciting new products and services, the company has embarked upon the largest tech deal ever, a $67 billion buyout of data storage company, EMC. And that is at 12 times EBITDA. Hefty.
Some salivating lips in Wall Street gurus are sensing a mix of $40b debt and $27b equity. Which means about $700m in fees.
Nice work, if you can get it.