The Challenges of Taking Dell Private

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By exploring the possibility of going private, Dell appears to hope that it can finally fix the problems that have led to a 40 percent plunge in stock price over the last five years. There's one problem, however: Going private may not be all that easy -- or help out the company in the end. The effort is under way, people briefed on the matter have confirmed to DealBook, with Dell talking with private equity firms and exploring obtaining bank financing. It's unclear how long it will take to reach a completed deal, though reports have suggested it may take nearly two months. But a leveraged buyout of a company as big as Dell would be no small feat, and it would be dependent on overcoming hurdles specific to the private equity…show more content…
could be as low as 8 percent. Avoiding the tax man could bolster that return to 31 percent. (That may less of a problem, according to the investor Wilbur L. Ross, who told CNBC on Tuesday that the company could sell eurodollar bonds, which may avoid incurring a steep tax charge.) Dell also had almost $5 billion in long-term debt as of Nov. 2. That means the newly private company would be highly indebted, though analysts at the ISI Group and Mizuho point out that the company has respectable cash flow, generating about $3.7 billion in cash from operations during that time. The bigger question for the company is whether going private would solve any of the issues it has faced for years. Its traditional business of making and selling personal computers has become less and less profitable, and Dell has already been trying to move into the more lucrative and stable market of providing hardware and software services for corporations. That's not something that requires Dell to be private, however. And there's also the question of whether a newly private Dell, forced to spend much of its revenue on paying down its debt, would have money to invest in its business or pay for new acquisitions. (Last year alone, the company struck 10 deals, including the $2.4 billion purchase of Quest Software.) Mr. Ross said on CNBC that he believed the chances of a deal coming together were about 50-50. But there's still a lot of work and finagling
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