The leveraged buyout of Dell Inc.

Abstract

The aim of this thesis is to analyse the investment process of a private equity fund in the specific case of the takeover of Dell Inc., covering both theory and practice. First, this work will examine the theoretical framework supporting private equity funds, emphasising on their investment process and valuation methods. Secondly, an overview of the Dell deal will be presented, showing the target and the players involved, as well as the market conditions preceding the transaction. Thirdly, a leveraged buyout valuation model will be carried out. Finally, the results will be contrasted against the theoretical framework. The findings suggest that Michael Dell and Silver Lake underpaid for Dell Inc., and that if both players are to succeed in transforming the Company, and the market is benevolent in the future, they are in line to obtain significant profits from their investment, well above private equity funds’ expected performance.