Dell Go Private? History, Research Say It Could Be Good For Everyone Involved


Should Dell become a private company, it will find much comfort in its decision from both the experience of other large companies that have done so as well as research supporting the benefits of going private.

Those benefits include the ability to restructure a company, push aside under-performing businesses and make long-term investments in R&D and innovation, all of which are hard or even impossible to do while under investors' microscopes.

For Dell, such a move would be driven by the need to reconcile its plans to be more of an enterprise-focused IT solution provider with the fact that the majority of its revenue still comes from its low-margin PC business.

 

[Related: Microsoft-Dell: What Is A Leveraged Buyout?]

The possibility of Dell going private via investments from equity firms and possibly CEO Michael Dell was raised earlier this month.

Such a deal would be valued in excess of $20 billion, making it one of the largest privatizations on record.

Dell partner Microsoft is widely believed to be interested in investing $3 billion as part of the privatization move.

Should Dell go private, it would be in good company.

Storage vendor Seagate in early 2000 went private as part of a complicated $20 billion transaction involving Seagate, Veritas Software and an investment group. Under that deal, Veritas acquired all of the Veritas shares that at the time were held by Seagate, as well as Seagate's securities in several small hardware and software vendors.

Seagate's core operating businesses, including hard disk and tape drive manufacturing and $800 million in cash retained, were then acquired for $2 billion in cash by an investor group, which included the storage vendor's management team. Seagate's shareholders received common shares of Veritas plus cash.

Seagate at the time was concerned about the tax liability connected with the $128 million shares of Veritas it owned, whereas Veritas was concerned about a possible hostile takeover of that company. Veritas was acquired by Symantec in a $13.5 billion deal in early 2005.

Seagate eventually went public again in December 2002 to get the capital needed to invest in the fast-growing hard drive market. By that time, it had consolidated its manufacturing facilities and went through a major reduction of its workforce.

NEXT: The Benefits Of Going Private