The Dell Leveraged Buyout, Part 2: Declining Growth and Margins, or “Robust Earnings Growth”?
At long last, we pick up today with Part 2 of this case study on the Dell leveraged buyout announced in February.
The timing is good because a bunch of factors have changed since the last time we looked at this deal, and it’s unclear who will “win” or if anyone will actually end up acquiring the company.
The more confusing the scenario, the better it is for a case study, right?
Yes, that’s what I thought… so let’s proceed with the revenue and expense side and build in some fun scenarios:
The Dell Leveraged Buyout, Part 1: Dangerous Dealings, or Slam-Dunk Success?
Last week I told you my life story (part 1 of it, anyway), and this week I’m going to do something almost as unexpected: pick apart a recent, high-profile deal and show you how to analyze it with video tutorials, Excel models, and more.
This “high-profile deal,” of course, is Silver Lake’s highly controversial $24 billion leveraged buyout of Dell.
And it’s an excellent example to learn from because of all the different elements:
- Microsoft’s participation (to what end?) via the $2 billion subordinated note it’s investing in.
- It’s not an acquisition of 100% of the company since Michael Dell is rolling over his equity and contributing more cash.
- The valuation and offer price are questionable, with Southeastern Asset Management claiming that the company is worth $24.00 per share rather than $13.65 per share.
- Scenarios for revenue and expenses will be very important because it’s a quasi-turnaround: Dell needs to transition away from its declining desktop and notebook businesses and move toward tablets, software, and services. And that may or may not work out.
- Finally, post-transaction acquisitions will play a huge role here because Dell is unlikely to achieve massive growth organically.
Let’s get started with my favorite model of all: the Excel kind.
First Things First: Have I Gone Crazy?
