Why Michael Dell Took His Own Company Private — The Largest Tech Take-Private in History with Silver Lake
$24.9B Take-Private → $67B EMC Acquisition → Enterprise Solutions Transformation → Re-listing
Background
Dell was one of the world's largest PC makers, founded by Michael Dell in a college dorm room in 1984. By 2013, the PC market had seen four consecutive years of declining shipments due to the rise of smartphones and tablets. Dell's stock had fallen 60% over five years, and investors were pricing it at a discount with the label of 'PC manufacturer.'
Michael Dell's strategic judgment: transforming Dell from a PC maker into an enterprise IT solutions company (servers, storage, cloud, security) would require years of massive investment and restructuring. This transformation was impossible in the public markets with their sensitivity to quarterly earnings.
In February 2013, Michael Dell and Silver Lake Partners announced a tender offer at $13.65 per share — a 25% premium over the pre-announcement closing price. Major shareholders including Carl Icahn and Southeastern Asset Management fiercely opposed the deal and made competing proposals, but after six months of conflict the deal closed in October 2013.
Deal Summary
- Deal Value
- $24.9B
- Acquirer
- Silver Lake Partners + Michael Dell
- Target
- Dell Inc.
- Announced
- February 5, 2013
- Closed
- October 29, 2013
- Country
- United States (NASDAQ: DELL → Private → NYSE: DELL)
Executive Summary
- Michael Dell + Silver Lake took Dell private at $24.9B ($13.65/share) — the largest tech Take-Private in history.
- Carl Icahn's competing $15.65/share proposal, Southeastern Asset Management opposition → deal approved after six months of conflict.
- Private period (2013–2018): accelerated PC-to-enterprise transition + active cloud and security acquisitions.
- 2016 EMC $67B acquisition — largest tech M&A deal ever. Controlling stake in VMware secured.
- 2018 NYSE re-listing (DELL) via VMware tracking stock exchange — Take-Private complete.
Industry Overview
The global PC market began declining 5–8% annually in shipments from 2012 due to smartphone and tablet substitution. Meanwhile, the enterprise IT market (servers, storage, cloud infrastructure) was growing on cloud migration demand. In 2013, investors were extremely pessimistic about the future of PC manufacturers, and Dell's P/E had compressed to around 5×.
Global PC Shipment Decline
-5–8%/yr
Four consecutive years of decline from 2012
Take-Private Offer Price
$13.65
+25% premium over pre-announcement close
EMC Acquisition Size
$67B
2016, largest tech M&A deal ever
VMware Market Cap (post-listing)
$47B+
As of 2019
Key Players
Company Overview: Dell Inc.
One of the world's largest PC brands, founded by Michael Dell for $1,000 in 1984. It grew through direct sales and supply chain efficiency, but faced structural PC market decline after 2010. Just before the acquisition, Revenue was $57B with ~50% PC dependency, making enterprise transformation urgent. Michael Dell was still serving as CEO and held approximately 14% of shares.
Take-Private Value
$24.9B
$13.65/share
Revenue (FY2013)
$56.9B
PC revenue ~50% of total
Michael Dell Stake
~14%
Expanded to ~75% post-Take-Private
Re-listing Value (2018)
~$34B+
NYSE: DELL listing basis
Deal Structure
Michael Dell's existing stake rollover of $3.7B + Silver Lake equity of $1.4B + Microsoft loan of $2.0B + TLB and bridge loan of ~$15.0B. Equity ratio ~28%. With the founder's stake converting as a rollover, actual new equity was relatively modest.
Pre-Deal
Michael Dell
~14% stake, CEO
Dell Inc.
PC, Server, Storage
Public Shareholders
NASDAQ: DELL 86%
Post-Deal
Michael Dell
Equity rollover $3.7B → 75%+
Dell Inc.
Private, PC-to-enterprise
Silver Lake
Equity $1.4B
Microsoft
$2.0B loan (preferred conversion)
TLB Lenders
~$9.0B (floating rate)
Key Terms
Advisors
Silver Lake used JP Morgan as lead arranger, and Michael Dell used Evercore as financial advisor. A Special Committee formed an independent advisory team (Lazard, Debevoise) to verify fairness.
Silver Lake + Michael Dell (Acquirer) Advisors
Evercore
Financial Advisor (Michael Dell)Deal structuring
JP Morgan
Lead ArrangerTLB and bridge loan
Simpson Thacher
Legal AdvisorTake-Private structure
Dell Special Committee (Independent Directors) Advisors
Lazard
Independent Financial AdvisorFairness Opinion
Debevoise & Plimpton
Independent Legal AdvisorBoard fiduciary duty verification
Financials
FY2013 reflects declining PC revenue. EBITDA margin ~8.5%, in line with tech hardware industry average. Short-term EBITDA expected to decline after going private as enterprise investment expands, but long-term growth secured.
| Item | FY2011 | FY2012 | FY2013 |
|---|---|---|---|
| Revenue | USD 61,494mn | USD 62,071mn | USD 56,940mn |
| COGS | USD 49,094mn | USD 49,653mn | USD 45,550mn |
| Gross Profit | USD 12,400mn | USD 12,418mn | USD 11,390mn |
| SG&A | USD 7,400mn | USD 7,504mn | USD 7,340mn |
| Operating Income | USD 5,000mn | USD 4,914mn | USD 4,050mn |
| EBITDA | USD 5,900mn | USD 5,800mn | USD 4,850mn |
| EBITDA Margin | 9.6% | 9.3% | 8.5% |
Valuation
The $13.65 offer price was at FY2013 EV/EBITDA ~5.1×, a discount to the tech hardware sector average (6–8×). Carl Icahn's $15.65 bid was higher, but weaker on financing execution feasibility.
| Metric | Value | Notes |
|---|---|---|
| Offer Price | $13.65/share | +25% over pre-announcement close |
| Deal EV | $24.9B | EV/EBITDA ~5.1× (FY2013) |
| Carl Icahn Competing Bid | $15.65/share | Rejected — financing execution weak |
| Market Cap at Re-listing (2018) | ~$34B | NYSE: DELL re-listing basis |
| EMC Acquisition Value (VMware) | $47B+ | VMware standalone market cap (2019) |
Final investment returns not disclosed by Dell/Silver Lake. Based on market estimates.
LevFin Deep-Dive — Debt Structure Anatomy
Dell Take-Private is a special founder-led Take-Private structure, not a pure PE LBO. Michael Dell's $3.7B rollover was the largest source of equity, while Silver Lake participated with a minority $1.4B equity stake. TLB of ~$9.0B + Microsoft's strategic $2.0B loan covered the remainder. Because tech companies have high intangible assets, collateral is difficult and TLB capacity is limited, making the founder rollover a critical element in the leverage structure.
LevFin Key Metrics
Deal EV
$24.9B
EV/EBITDA 5.1× — undervalued entry
EMC Additional Acquisition
$67B
Largest tech M&A ever while private
Re-listing Market Cap (2018)
~$34B
+37% vs. Take-Private price
Founder Rollover Ratio
~15%
#1 equity source — reduces PE cost
Capital Structure
| Tranche | Amount | Rate / Spread | Maturity | Seniority |
|---|---|---|---|---|
| Founder Rollover (Michael Dell) | $3.7B | — | N/A | Equity |
| Silver Lake Equity | $1.4B | — | N/A | Equity |
| Term Loan B (TLB) | ~$9.0B | LIBOR+350bps (floating) | 7 years | Sr. Secured |
| Microsoft Strategic Loan | $2.0B | Preferred conversion option | 5 years | Sr. Secured |
LevFin Lessons From This Deal
Tech LBO Specifics — Intangibles = Low Collateral = Limited Leverage
Companies with substantial physical assets like hotels and retail can use CMBS and ABL to increase leverage, but software and brand-driven tech companies have limited TLB capacity because of difficult collateral setting. Dell's relatively low Entry Debt/EBITDA of ~3× reflects the structural characteristics of tech company LBOs.
Take-Private → Strategic Transformation → Re-listing — PE's Three-Stage Value Creation
Dell's playbook: ① Take-Private from an undervalued public market → ② Enterprise transformation during private period (EMC and VMware acquisitions) → ③ Re-listing after transformation complete. This three-step pattern requires sustained founder leadership as the critical prerequisite.
Strategic Partner = Value Beyond a Simple LP
Microsoft's $2B loan had strategic meaning beyond interest rates — it strengthened Dell's partnership in the Windows and Azure ecosystem. In PE deals, bringing in a strategic partner (rather than a pure capital provider) as an LP or creditor can simultaneously achieve capital cost reduction and business synergies.
LevFin Chapters This Deal Illustrates
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Deal Rationale
Michael Dell + Silver Lake Investment Thesis
- Public market undervaluation: EV/EBITDA at ~5× with PC manufacturer label → revaluation opportunity after going private
- Private = strategic freedom: large-scale profit-sacrificing acquisitions possible without quarterly earnings pressure
- Founder-led: Michael Dell's 75%+ stake ensures long-term strategy execution
- Enterprise transformation thesis: PC decline → revenue diversification into server, cloud, and security portfolio
- Microsoft strategic loan: Windows ecosystem partnership strengthened + financing cost reduced
Special Committee Approval Rationale
- 25% premium over pre-announcement price — immediate value realization for current shareholders
- Carl Icahn's alternative ($15.65) lacked execution feasibility — failed Fairness Opinion
- Structural PC market decline → long-term stock recovery uncertain if remaining independent
- Trust in Michael Dell's long-term execution capability — founder's skin-in-the-game
Post-Deal Assessment (May 2026 as of)
The Take-Private strategy succeeded. During the private period (2013–2018), Dell reduced PC dependency and strengthened its server, storage, and security portfolio. The 2016 $67B EMC acquisition simultaneously secured the #1 in storage (EMC) and #1 in virtualization (VMware). The 2018 NYSE re-listing via VMware tracking stock exchange posted a market cap of ~$34B — exceeding the Take-Private price of $24.9B.
Positives
- EMC and VMware acquisitions completed full-stack enterprise IT portfolio
- PC revenue dependency reduced from ~50% to below ~35%
- VMware virtualization and cloud assets emerged as the core value driver of Dell overall
- Market cap of $34B+ at 2018 re-listing — 40%+ value increase over Take-Private price
Risks & Concerns
- ~$50B in debt from EMC acquisition — interest costs pressure cash flows
- VMware independence concerns: Dell's control of VMware constrains customers' multi-cloud choice
- Complex capital structure post-re-listing (VMware tracking stock) made investor understanding difficult
This announcement appears as a matter of record only
Silver Lake + Michael Dell
Acquirer
Dell Inc.
Target
Dell Take-Private
Transaction Size
$24.9B
$24.9bn
EV / EBITDA
5.1×
Multiple
Closed
October 2013
Deal Date
Editor's Note
Dell Take-Private's core lesson: going private used not as 'escape' but as a means of 'strategic transformation' — a rare and successful example. Without Michael Dell's 75% stake and founder leadership, the $67B EMC acquisition would have been impossible. The most powerful use case of Take-Private is 'long-term transformation that the public market would not permit.'
Key Concepts in This Deal
A PE acquisition structure in which a listed company is taken private through a tender offer. Allows long-term restructuring and investment free from quarterly earnings pressure. Primary targets include companies undervalued by public markets, like Dell, or companies requiring large-scale strategic transformation.
An opinion from an independent financial advisor verifying that the proposed acquisition price is fair to shareholders. In a Take-Private where there is a conflict of interest (management = acquirer), the Special Committee must obtain a Fairness Opinion from an independent advisor.
A structure in which the founder converts their existing stake rather than cashing out, into equity of the new entity after acquisition. Michael Dell rolled over $3.7B in shares to secure 75%+ of equity — reducing acquisition costs while creating perfect alignment with PE partners.
A special class of stock linked to the economic performance of a specific business unit (VMware). Dell re-listed on NYSE in 2018 by exchanging VMware tracking stock for Dell common stock — a reverse merger that enabled listing without an IPO.
A structure in which a strategic partner (a large corporation) rather than a conventional lender provides the loan for an LBO or Take-Private. Microsoft's $2B loan was not merely financial support — it also served the strategic purpose of strengthening Dell's partnership in the Windows and Office ecosystem.
Frequently Asked Questions
What were Michael Dell's primary reasons for taking his own company private?
Michael Dell publicly cited three reasons. First, transforming to enterprise solutions amid the PC decline required years of massive investment and profit sacrifice, which was impossible in public markets with their quarterly earnings pressure. Second, the public market was undervaluing Dell, creating a revaluation opportunity after going private. Third, as a founder, he wanted to execute his long-term vision without compromising with public shareholders' short-term profit demands.
Why did Carl Icahn oppose the Take-Private, and what was the outcome?
Carl Icahn argued that $13.65 was 30%+ below Dell's true value and put forward an alternative proposal at $15.65. Icahn's strategy was to pay shareholders $12/share immediately as a special dividend through a leveraged recapitalization. However, the Special Committee and independent advisors questioned the financing execution feasibility of Icahn's plan, and Michael Dell's proposal passed in the final shareholder vote. Icahn conceded but continued to argue the acquisition price was too low.
How does the $67B EMC acquisition connect to the Take-Private?
The private status was decisive. A listed Dell attempting an acquisition of $67B — 2.5× its market cap of $24B — would have faced extreme public market backlash and inevitable stock collapse. Being private allowed Michael Dell to persuade the board and banks without quarterly market pressure to close the deal. This is the most powerful use case of Take-Private.
Was Dell Take-Private a successful deal for PE?
From Silver Lake's perspective, yes. Silver Lake invested $1.4B in equity and at the 2018 re-listing with a market cap of ~$34B recovered a portion of that value through continued sales, estimated at MOIC 2–3× and IRR 15–20%. However, Dell's financial structure remained stressed after relisting due to the large debt load from the EMC acquisition. 'The deal succeeded, but the subsequent debt burden was heavy.'
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Sources & Notes
- [1]Dell Inc. (2013). Proxy Statement — Special Meeting of Stockholders. SEC Filing, February 2013.
- [2]Dell Inc. (2013). Merger Completion Press Release. October 29, 2013.
- [3]Wall Street Journal (2013). Michael Dell Wins Fight to Take Dell Private. September 2013.
- [4]Bloomberg (2016). Dell to Buy EMC in Record $67 Billion Deal. October 2015.
- [5]Dell Technologies (2018). Form 8-K — VMware Tracking Stock Transaction and NYSE Re-listing. December 2018.
- [6]Harvard Business School (2014). Michael Dell's Buyout of Dell Inc. HBS Case 9-814-052.
- [7]Reuters (2013). Carl Icahn Abandons Dell Fight After Buyout Vote. September 2013.
- [8]Financial Times (2018). Dell Returns to Stock Market After Five Years. December 2018.