DEALMAKER
Richard Capelouto, 51, a corporate partner in the Palo Alto office of Simpson Thacher & Bartlett.
THE CLIENT
Silver Lake Partners, the Menlo Park, California–based technology-focused investment firm.
THE DEAL
THE DETAILS
The terms of the transaction, which was announced Tuesday, call for the investment group buying Dell to pay $13.65 in cash for each of the company's shares. That figure represents a 25 percent premium over Dell's closing share price on January 11, the day before rumors of a potential deal began to circulate. Michael Dell will contribute his 14 percent stake in the company, which is worth about $3.6 billion‚ to the transaction. Another $750 million in cash will come from Michael Dell and his investment firm, MSD Capital. Silver Lake is investing $1.4 billion in the deal, while Microsoft Corp. is supplying a $2 billion loan. Much of the deal is being financed with debt.
The proposed transaction has the support of a special committee of Dell's board and is expected to close before the end of the second quarter of Dell's 2014 fiscal year, pending the approval of regulators and the company's shareholders. After the deal closes, Michael Dell will retain his dual roles as the computer maker's chairman and CEO and will continue to hold a significant stake in the company.
As The Am Law Daily reported earlier this week, the agreement includes a provision for a 45-day "go-shop" period during which the special board committee can seek alternative bids. A rival bidder selected by the committee within that period would be required to pay the Silver Lake–led investor group a $180 million termination fee. An alternate bidder chosen after that must pay a $450 million breakup fee. In a move Bloomberg reports was meant to protect shareholders' interests, the Dell board also pressed for a provision requiring the Silver Lake group to pay a "a larger-than-normal" $750 million fee should it attempt to back out of the deal.
THE BIG PICTURE
Dell and other PC makers have stumbled in recent years as consumers shift their technology-related spending toward smartphones and tablets. Against that backdrop, Reuters reports, Dell is looking to focus on expanding its software and services portfolio, while possibly deemphasizing its struggling PC business. The New York Times, meanwhile, reports that Microsoft's decision to help finance the deal suggests that the software giant believes one of its main business partners needs to make a change.
If completed, the deal would be the largest leveraged buyout (LBO) since the onset of the economic crisis and potentially give the private equity section a major confidence boost. Capelouto says that while capital markets have been strong enough to produce some meaningful LBOs in recent years, big deals comparable to the Dell buyout haven't come together because investors haven't been able to find the right fit. "I think there [are] opportunities for large transactions, primarily because of the availability of the debt financing," he says.
THE BACKSTORY
A private equity powerhouse, Simpson Thacher has a long history with Silver Lake and has advised the private equity client on numerous transactions and investments since its 1999 formation, Capelouto says. Capelouto himself helped launch Simpson Thacher's own Palo Alto office that year and worked on the private equity firm's first fund, which closed on $2.3 billion. "From that point on," he says, "we've had a relationship with them."
Among the Silver Lake deals in which Capelouto has had a hand: 2010's $3.1 billion purchase of financial market data provider Interactive Data Corporation in which the firm advised Silver Lake and private equity firm Warburg Pincus and Silver Lake's $1.2 billion purchase of Serena Software, in 2005.
