Minority shareholder treatment surrounding the Dell MBO

PurposeThis paper is a clinical examination of the October 2013 Management Buyout of Dell Inc. by founder Michael Dell and Silver Lake Partners for a total consideration of $13.88 per share. The proposed transaction was targeted by shareholders unhappy with the deal price and voting framework. Vario...

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Bibliographic Details
Published inManagerial finance Vol. 47; no. 8; pp. 1077 - 1093
Main Author Kruse, Timothy A
Format Journal Article
LanguageEnglish
Published Patrington Emerald Publishing Limited 13.07.2021
Emerald Group Publishing Limited
Subjects
Activism
Agreements
Bids
Computer industry
Court decisions
Dell, Michael
Fair value
Fees & charges
Management buyouts
Mutual funds
Personal computers
Shareholder activism
Shareholder voting
State court decisions
Stockholders
Delaware
United States > US
Shareholder activism
Go-shop agreement
Appraisal
Management buyout
Shareholder voting
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Summary:PurposeThis paper is a clinical examination of the October 2013 Management Buyout of Dell Inc. by founder Michael Dell and Silver Lake Partners for a total consideration of $13.88 per share. The proposed transaction was targeted by shareholders unhappy with the deal price and voting framework. Various shareholders went on to file an appraisal suit. Examining these events yields insights into shareholder rights issues in a major transaction.Design/methodology/approachThe paper examines events surrounding the acquisition including the negotiation process, go-shop period, shareholder activist demands for a higher price, shareholder voting and the subsequent appraisal trial and appeal.FindingsDespite suggesting Dell's board fulfilled its fiduciary duties, Delaware Vice Chancellor Travis Laster awarded petitioning shareholders $17.62 per share, a 27% premium to the final deal consideration. This article draws on Laster's decision and research examining topics raised by the surrounding events to argue minority shareholder interests were not sufficiently protected.Research limitations/implicationsThe Dell transaction represents only one data point. Moreover, Vice Chancellor Laster's decision was reversed on appeal.Originality/valueNevertheless, the paper discusses the nuances surrounding many issues of interest to practitioners involving large going private transactions. It could also be used to illustrate many “real world” perspectives in an advanced corporate finance or mergers and acquisitions class.
ISSN:0307-4358
1758-7743
DOI:10.1108/MF-09-2019-0480