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The Shareholder Forumtm

special project of the public interest program for

Fair Investor Access

Supporting investor interests in

appraisal rights for intrinsic value realization

in the buyout of

Dell Inc.

For related issues, see programs for

Appraisal Rights Investments

Fair Investor Access

Project Status

Forum participants were encouraged to consider appraisal rights in June 2013 as a means of realizing the same long term intrinsic value that the company's founder and private equity partner sought in an opportunistic market-priced buyout, and legal research of court valuation standards was commissioned to support the required investment decisions.

The buyout transaction became effective on October 28, 2013 at an offer price of $13.75 per share, and the appraisal case was initiated on October 29, 2013, by the Forum's representative petitioner, Cavan Partners, LP. The Delaware Chancery Court issued its decision on May 31, 2016, establishing the intrinsic fair value of Dell shares at the effective date as $17.62 per share, approximately 28.1% more than the offer price, with definitive legal explanations confirming the foundations of Shareholder Forum support for appraisal rights.

Each of the Dell shareholders who chose to rely upon the Forum's support satisfied the procedural requirements to be eligible for payment of the $17.62 fair value, plus interest on that amount compounding since the effective date at 5% above the Federal Reserve discount rate.

Note: On December 14, 2017, the Delaware Supreme Court reversed and remanded the decision above, encouraging reliance upon market pricing of the transaction as a determination of "fair value." The Forum accordingly reported that it would resume support of marketplace processes instead of judicial appraisal for the realization of intrinsic value in opportunistically priced but carefully negotiated buyouts.


Forum reference:

Creating the appearance of competitive bidding in an insider buyout


For copies of the expert's report referenced in the article below, and of the court brief that cites it, see

Note: The observations of the Forum's chairman quoted below could be misunderstood without their original context. The statement in an email was as follows (emphasis added here, not in original):

"Since successful private equity players like Silver Lake and Blackstone are considered the smartest guys on the Street, you can assume there are a couple of things they won’t do. One is to pay an amount for a company that doesn’t leave a safe discount to its intrinsic value. And the other is to invest in a company that’s going to be run by a strong-willed leader like Dell after you’ve wrecked his sweetheart deal and bid up the price he has to pay for his stock."


Source: Austin Business Journal, December 9, 2015 article



200 people, 300 hours of meetings and $25M: Details of Blackstone's due diligence to buy Dell

Dec 8, 2015, 7:00am CST Updated Dec 9, 2015, 3:41pm CST



Christopher Calnan

Staff Writer

Austin Business Journal


Dell Inc.’s go-shop period in the run-up to its 2013 shareholder buyout prompted the Round Rock tech giant to pay another prospective buyer as much as $25 million in due-diligence expenses. What's more, it caused a prospective Dell customer to have concerns the buyer would replace CEO Michael Dell, according to recently released court documents.

The Delaware court filing made in connection with a continuing shareholder appraisal lawsuit offers a rare glimpse at the inner workings of the $24.9 billion Dell buyout by Silver Lake Partners LP and Michael Dell, that took almost a year to complete.

Round Rock-based Dell Inc. paid $25 million in due diligence expenses of a New York firm that considered a competing shareholder buyout offer in 2013.

Sam Hodgson

The other prospective buyer, New York-based private equity firm Blackstone Group LP (NYSE: BX), collected the $25 million from Dell to pay for scores of workers to comb through Dell’s financial records to determine what it should bid for the company after an investor group led by Michael Dell proposed $13.65 per share, according to a filing authored by Harvard University Law School Professor Guhan Subramanian. Subramanian was hired by the minority shareholders who objected to the buyout price.

The report filed with the court indicates that the odds were against the Blackstone Group as it tried to complete the due diligence in six weeks allowed by the go-shop period compared with the six months of due diligence investment firm California-based Silver Lake Partners did when backing Michael Dell in the buyout.

The Blackstone Group assigned 200 workers and generated 300 hours of meetings with Dell executives before pulling out of the process that Dell’s board initiated in search of a counter offer. According to Subramian's report in the court documents, the deck was stacked in favor of Michael Dell’s investor group because a superior bid, if accepted, would have alienated Michael Dell as CEO of the privately held company.

Gary Lutin — chairman of Shareholder Forum, a company that moderates disputes between shareholders and companies — said Silver Lake Partners and the Blackstone Group weighed two broad factors when considering buyout offers.

“One is to pay an amount for a company that doesn’t leave a safe discount to its intrinsic value,” said Lutin, whose company is neutral in the Dell case but provides administrative support to shareholders. “And the other is to invest in a company that’s going to be run by a strong-willed leader like Dell after you’ve wrecked his sweetheart deal and bid up the price he has to pay for his stock.”

The buyout took eight months and weathered challenges by activist investor Carl Icahn — plus it took several votes by shareholders to complete. After at least one failed vote, Dell’s special committee changed the buyout rules to consider non-votes, which initially accounted for 27 percent of the total, as those in favor of the buyout instead of against.

Subramanian couldn’t be reached for comment. Dell spokesman David Frink confirmed the $25 million due diligence expense but declined comment, citing the on-going lawsuit.

Blackstone Group spokeswoman Christine Anderson declined to confirm the final amount Dell paid Blackstone or the number of employees involved in the due diligence. The firm initially offered $14.25 per share before withdrawing it bid in April 2013 due in part to "the rapidly eroding financial profile of Dell."

Dell, the No. 3 computer maker in the world, employs about 13,000 workers in Central Texas, down from about 14,000 last year.

Although Dell eventually paid shareholders $13.75 per share, attorneys for the more than 100 minority shareholders objecting to the price are now asking for more than double — or $28.61 per share, according to a Nov. 18 post-trial opening brief.

The Subramanian report also includes an anecdote that underscores how tech buyers look for stability with their vendors. It also reveals the level of Michael Dell’s involvement in the company’s business operations.

In April 2013, two months after Michael Dell announced his buyout plans, Reuters reported that Blackstone had “extensive discussions” with Michael Capellas, former CEO of Compaq Computer Corp., who was a possible candidate for Dell’s CEO position post buyout.

Michael Dell sent a “sharply-worded e-mail” to Blackstone Group Senior Managing Director Chinh Chu complaining that such reports cause concern for prospective customers, according to Subramanian’s report.

“This evening I was having dinner with a potential customer worth over $600 million in revenue to our company,” Michael Dell wrote. “They were reacting quite negatively to the story and others like it. The customer was suggesting ways to contractually protect themselves from the risks associated with …the kinds of changes suggested in press speculation. I am disappointed by the real damage stories like this and others are inflicting on our business.”

Shareholder appraisals typically take 18-24 months. But the size and complexity of the Dell buyout make this case anything but typical. In mid-2014, the Shareholder Forum requested Dell lawyers withdraw a long list of demands for documentation from the minority shareholders to avoid a delay in reaching an agreement.

A ruling on the appraisal is expected in February or March, Lutin said.

Christopher Calnan covers technology, finance and clean energy for the Austin Business Journal.


This project was conducted as part of the Shareholder Forum's public interest  program for "Fair Investor Access," which is open free of charge to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The management of Dell Inc. declined the Forum's invitation to provide leadership of this project, but was encouraged to collaborate in its progress to assure cost-efficient, timely delivery of information relevant to investor decisions. As the project evolved, those information requirements were ultimately satisfied in the context of an appraisal proceeding.

Inquiries about this project and requests to be included in its distribution list may be addressed to

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.