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Companies might want to go private in order to restructure their businesses (when they feel that the
process might affect their stock prices poorly in the short run)
Collateral - The assets of the company being acquired in addition to the assets
of the acquiring company.
Transaction structure:
Estimate the multiple at which the sponsor is expected to exit the investment (should generally be similar
to the entry multiple).
Calculate equity returns (IRRs) to the financial sponsor and sensitize the results to a range of leverage and
exit multiples, as well as investment horizons.
Solve for the price that can be paid to meet the above parameters (alternatively, if the price is fixed, solve
for achievable returns).
DELL-THE TIMELINE
Falling PC market
With the start of 21st century the market started shrinking and was further
badly effected with emergence of tablets, smart phones and other lighter
devices.
Other Reasons
Going to cloud: Being public made it hard and risky for Dell to expand in
cloud business. The Dell could easily expand in cloud business without
having to deal with objections from other investors.
Going private would help Dell cut various cost of running a public
company, save it from private investors scrutiny providing it more flexibility
to operate in a low margin PC business.
THE DEAL
Michael Dell partnered with Silver Lake in order to
make Dell private
They offered $13.65 per
share to buy out the
company. They valued
Dell at $24.4 billion out of
which Mr. Dell share was
15.6%.