It appears a deal to take Dell, the world's third largest computer maker, private is set to go through. The buyout is being done by a consortium led by former founder, Michael Dell. Currently the buyout price has been narrowed from $13.50 to up to $13.75 per share. This would give Dell a market value of up to $23.9 billion and make this the largest buyout since the financial crisis. While even the $13.50 valuation is an improvement from the $11 the stock traded at before news of the potential buyout surfaced, it is a far cry from the $17.80 the firm traded at the previous year. This rapid devaluation of the firm's stock reflects the loss of market share Dell has suffered to competitors like Lenovo Group and indicates the decline the company has been experiencing. Michael Dell and his partners will hope to re-ignite growth in the firm if they are able to acquire it. As for the economy as a whole, the fact that large-scale leveraged buyouts are beginning to occur again is a huge sign that the economy is recovering and that institutions are regaining an appetite for risk.
http://www.cnbc.com/id/100433280
4 comments:
The willingness of firms to assume more risk is a very good sign for the economy going forward. Firms have been so cautious since the recession in who they hire and especially banks and who they lend to. A new overall mentality within the economy that things are improving will help spur growth again.
Great to see M & A activity going on again after the recession. It indicates that individuals and firms are becoming confident which is always helpful especially after such an economic recession. Could be the start of more buyouts that could potentially stimulate growth?
I agree with you guys that it is good to see large-scale bank lending like this occurring again. However, my question is it too soon and should leveraged-buyout activity be occurring in this current economic environment? What I mean by this is that there is still a lot of risk in the markets today. How well will China be able to switch from a export-driven economy to a consumption-based one? Will the eurozone be able to successfully de-leverage itself while keeping all of its members? What will the U.S. do about its own budget and debt issues? My concern is that with so much economic uncertainty out there, a huge negative economic event could occur and it would almost certainly have extremely disastrous effects on LBO business if it does, so I do not know if it is a good idea for LBOs to start to occur right now.
While I think we are all concerned about starting to take risks again, someone has to take the first step. I think that seeing Dell take this risk will stimulate similar actions by other companies, thus effectively boosting economic recovery. This may be a risk for Dell and the U.S. economy as a whole, but it may also be the push we have all been waiting for.
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