Silver Lake Bid to Push Through Come Hell or High Water

By Marc Castro

Apr 22, 2013 09:40 AM EDT

The conditions indicated in the Silver Lake-Dell leveraged buyout plan for Dell Inc would provide little or no consideration but to push through with the deal. This is despite the fact that the personal computer market is contracting at a higher rate than predicted.

Should the technology focused private equity firm walk away from the US$24.4 billion buyout plan, it would still need to pay US$750 million to exit the transaction according to the merger agreement. Aside from this amount, Dell can sue the consortium to force it to complete the transaction.

Last April 19, Dell's share values fell below the US$13.65 per share offer made in the Silver Lake deal. There was also speculation that Blackstone Group LP would abandon its counteroffer because of the rapid decline of Dell's financial profile. Regardless of the outside issues, it is expected that the Silver Lake bid would push through to avoid the penalties and other legal issues.

At the start of the discussions in 2012, Dell forecasted the operating income at US$5.6 billion for the fiscal year through January 2014. After three revisions, the forecast was reduced to US$3 billion because of the contracting PC market.

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