THE WALL STREET JOURNAL.
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Updated March 27, 2013, 4:17 p.m. ET
Silver Lake's Win-Win
Approach to Dell
Is the guy who "wins" an
auction really the winner, or just the sap that paid the most?
Silver Lake Partners may ponder that in the battle for
Dell. The private-equity firm certainly has two big reasons not to
One is that it won't be too
painful to lose the deal, considering the roughly $200 million the firm
would pocket should Dell end up in other hands. That includes the $180
million breakup fee plus other investment expenses.
Worth noting is that a
sizable portion of that money would go to the firm's partners.
Private-equity firms' share of investment profits is normally 20%, with the
rest going to investors. But Silver Lake typically keeps half of fees like
this one. Silver Lake Partners has seven senior leaders and seven other
managing directors. Any way you slice $100 million, it would be a nice
Still, the bigger reason to be disciplined on price is the obvious
challenges Dell faces. Having partnered with founder
Michael Dell, it seems Silver Lake wouldn't drastically change the
company's strategy. Lately, that strategy hasn't worked out so well. So
naturally, Silver Lake wants a margin of safety built into the bid.
Indeed, this is echoed in the use of "stub equity" structures in
Carl Icahn's competing proposals. These allow existing Dell investors to
participate in any future gains—a reflection that bidders aren't willing to
take those gains for granted and pay substantially more upfront.
Write to Rolfe Winkler at
A version of this
article appeared March 28, 2013, on page C10 in the U.S. edition of The Wall
Street Journal, with the headline: Silver Lake's Win-Win Approach to Dell.
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