itting at the headquarters of his Austin, Texas–based philanthropic foundation, personal computer pioneer Michael Dell is acutely aware that on that very morning in that very state, Amazon founder Jeff Bezos has rocketed himself into space in his Blue Origin space shuttle as millions of viewers around the world looked on. “I’m perfectly happy staying on planet Earth,” Dell, shrugging, says with a chuckle.
In turn, Dell Technologies, at $75 billion, is worth more than four times what it was before it went private. Because of all that leverage, Dell, Durban’s Silver Lake and co-investors have done far better, with total gains of more than $40 billion, according tocalculations. Dell’s personal net worth has risen to $50 billion. In many ways, he was the architect of the biggest buyout coup of all time.
Soon Dell will sit at the helm of two separate public companies: Dell Technologies, his personal computer and IT infrastructure giant, and its spinoff, VMware, a mainstay in cloud-computing infrastructure. Both will hold manageable debt levels and a valuable currency for growth and acquisitions. A 24-year-old Michael Dell stands in his Austin, Texas PC manufacturing facility in April 1989. Dell had started his business five years earlier in his University of Texas dorm room.He discovered he could repackage the components of an IBM PC at costs up to 40% lower by managing inventories shrewdly and running a direct-sales model. He would take orders by mail and phone, then assemble the PCs and ship them within one to three weeks, bootstrapping his business with customer orders.
For more than a decade, he’d socked away billions of dollars in a family office, MSD Capital, which invested heavily in the cutthroat world of private equity buyouts. One of its earliest investments was in a Silver Lake fund. By 2012, that firm’s partnership was in transition, and its ambitious young dealmaker Egon Durban was hungry to make big investments.
“Michael is special for his willingness to take risks, but to be right and do it in a way that’s going to be successful,” Durban says. “As opposed to lighting dollar bills on fire recklessly.” For months, he and Durban met with EMC executives all over the world but remained far from a deal. So Dell decided to host EMC CEO Joe Tucci, board director Bill Green and an EMC executive named Harry You. Adding urgency to the meeting was the looming retirement of Tucci and the involvement of activist investor Elliott Management, which had bought a large position in EMC. A premium-priced takeover by Dell was an obvious solution. The hangup? Durban and Dell needed to find $65 billion in cash.
Then came the money. Did Dell have it? It was now Dimon’s part to play. “They’ve got the money,” he said. “We’ll do the whole deal.” In 2018, they pulled $9 billion in cash from VMware to buy shareholders out of the tracking stock in an aggressive deal that first tried to pay shareholders 60 cents on the dollar for their shares, sparking an outcry from activist investors Elliott Management and Carl Icahn, Dell’s old foil, who likened him to Machiavelli and deemed the move “totalitarian.” The deal was renegotiated to a fairer $14 billion, or 80 cents on the dollar.
“It is incredible how much of the company Michael now owns,” says a fawning Marc Benioff. “There really isn’t an entrepreneurial success story of this magnitude that I can think of.” “You’re already buying eight of the 20 things you need from us,” Dell says of his pitch to large and midsize enterprises. “Why don’t you just buy all 20 from us? And by the way, we’ll make it worth your while.”
I wonder how much of a windfall the potential success of project Alvarium will make him?
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