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Actually, the judge did it pretty much entirely opposite what you're saying. The judge chose the final number largely because he ruled that Silverlake, the priv

Actually, the judge did it pretty much entirely opposite what you're saying. The judge chose the final number largely because he ruled that Silverlake, the private equity portion of the deal, would need to make 20-30% to justify the price of the deal, hence Silverlake's purchase at the lower number actually justified, to him, proof of the price he chose. If Dell wasn't actually worth a 20-30% premium from their purchase price, Silverlake wouldn't have done the deal is the theory. (There are of course issues with this, but this is the logic used.)

josh2600 10y ago
I love this logic because it implies that if a private equity firm buys a company, the shareholders are automatically being screwed and should sue.
- Animats 10y ago
  That's usually a good assumption. If you're an existing shareholder when a company goes private, you're forced to sell at a set price. That's why it's a legal issue. That forced sale is not a free market transaction. If you look at the history of leveraged buyouts ("private equity" is usually powered by borrowing against the company's assets, not a pure cash transaction), the existing stockholders generally lose.
  - yellowstuff 10y ago
    65% of Dell shareholders voted for the deal, in what seemed to be a fair process. (Michael Dell wasn't allowed to vote his own shares, and non-voters counted as voting against.) Any time people vote someone is "forced" to accept an option they voted against, but the process can still be fair. If equity holders usually get screwed by leveraged buyouts then they should start voting against them. I agree with the author that having a judge determine the correct price seems perverse.
    - slededit 10y ago
      Not really a fair number to quote when Fidelity accidentally voted a huge number of shares in favor.
      - Falcon9 10y ago
        As noted in the footnotes, at a cost of $160MM to them based on this verdict! Oops indeed.
    - newjersey 10y ago
      This came up in the wherein discussion. Should it be legal for 50%+ to see over the rest? Should minority owners have any other recourse? I get that this isn't a democratic government where we have to guarantee full protection under the law for an individual but what I'd the 51% decides the sale price should be 1picodollar per share and then the new owner awards the 51% with shares effectively giving back their ownership? I imagine this won't happen in real life but just as a thought experiment... should it be OK?
      - belltaco 10y ago
        There are several existing laws that can be applied in a scenario like that, e.g. anti-syndicate, anti-collusion, anti-bribery laws etc.
        newjersey 10y ago
        They all sound like criminal charges? I anal but I was thinking more of civil remedies if possible.
      - yellowstuff 10y ago
        No, I don't your example is OK. I don't know what law it violates, but I doubt it would be allowed. And there are many real world examples where management acquired a company cheaply because they hid the true value of the company, or didn't pursue competing offers. Acquisition by management is super conflicted and should receive a lot of scrutiny. However, according to the article the judge thought the process was fair, that there was no way to sell the company for a higher price, and shareholders voted for the deal while possessing all relevant information. I think that given those facts the deal price should be considered fair.
  - hinkley 10y ago
    Anybody remember when Corporate Raiding was a thing?
- tim333 10y ago
  If not overturned on appeal it could set an interesting precedent to argue that in court for all other private equity buyouts that have ever taken place.
- joshdickson 10y ago
  My above comment is incomplete when it comes to this point; that implication is not actually the case here. Normally this is in fact not the case, because the acquirer has some sort of strategic reason behind their purchase that they believe will boost the value of the asset aside from simply operating the company as it had planned on doing prior to the acquisition. For instance, Silverlake/Dell is in the process of buying EMC - Dell/Silverlake believe that strategically, a combined Dell/EMC (or "Dell Technologies") is worth more than both companies on their own - but it's Silverlake/Dell/bond holder's cash that will make this happen. Therefor it's not realistic for current EMC shareholders to simply claim the value of EMC should be higher on its own because the purchase relies on operating synergies between Dell and EMC. The Dell buyout by Silverlake is completely different, because throughout the sales process, it was clear that Michael Dell and Silverlake were not going to do anything to alter Dell's operational plan - that is, everything that Michael Dell and Silverlake were going to do to the company while private is pretty much exactly what the plan was had Dell remained public. So the judge decided to rule that Silverlake must have valued Dell at approximately what he ruled them to be. The case would be very different if Michael Dell/Silverlake were taking the company private and making major strategic changes to its businesses (shareholders could still sue, but the line of reasoning from the judge would be different).

josh2600 10y ago

I love this logic because it implies that if a private equity firm buys a company, the shareholders are automatically being screwed and should sue.

Animats 10y ago
That's usually a good assumption. If you're an existing shareholder when a company goes private, you're forced to sell at a set price. That's why it's a legal issue. That forced sale is not a free market transaction. If you look at the history of leveraged buyouts ("private equity" is usually powered by borrowing against the company's assets, not a pure cash transaction), the existing stockholders generally lose.
- yellowstuff 10y ago
  65% of Dell shareholders voted for the deal, in what seemed to be a fair process. (Michael Dell wasn't allowed to vote his own shares, and non-voters counted as voting against.) Any time people vote someone is "forced" to accept an option they voted against, but the process can still be fair. If equity holders usually get screwed by leveraged buyouts then they should start voting against them. I agree with the author that having a judge determine the correct price seems perverse.
  - slededit 10y ago
    Not really a fair number to quote when Fidelity accidentally voted a huge number of shares in favor.
    - Falcon9 10y ago
      As noted in the footnotes, at a cost of $160MM to them based on this verdict! Oops indeed.
  - newjersey 10y ago
    This came up in the wherein discussion. Should it be legal for 50%+ to see over the rest? Should minority owners have any other recourse? I get that this isn't a democratic government where we have to guarantee full protection under the law for an individual but what I'd the 51% decides the sale price should be 1picodollar per share and then the new owner awards the 51% with shares effectively giving back their ownership? I imagine this won't happen in real life but just as a thought experiment... should it be OK?
    - belltaco 10y ago
      There are several existing laws that can be applied in a scenario like that, e.g. anti-syndicate, anti-collusion, anti-bribery laws etc.
      - newjersey 10y ago
        They all sound like criminal charges? I anal but I was thinking more of civil remedies if possible.
    - yellowstuff 10y ago
      No, I don't your example is OK. I don't know what law it violates, but I doubt it would be allowed. And there are many real world examples where management acquired a company cheaply because they hid the true value of the company, or didn't pursue competing offers. Acquisition by management is super conflicted and should receive a lot of scrutiny. However, according to the article the judge thought the process was fair, that there was no way to sell the company for a higher price, and shareholders voted for the deal while possessing all relevant information. I think that given those facts the deal price should be considered fair.
- hinkley 10y ago
  Anybody remember when Corporate Raiding was a thing?
tim333 10y ago
If not overturned on appeal it could set an interesting precedent to argue that in court for all other private equity buyouts that have ever taken place.
joshdickson 10y ago
My above comment is incomplete when it comes to this point; that implication is not actually the case here. Normally this is in fact not the case, because the acquirer has some sort of strategic reason behind their purchase that they believe will boost the value of the asset aside from simply operating the company as it had planned on doing prior to the acquisition. For instance, Silverlake/Dell is in the process of buying EMC - Dell/Silverlake believe that strategically, a combined Dell/EMC (or "Dell Technologies") is worth more than both companies on their own - but it's Silverlake/Dell/bond holder's cash that will make this happen. Therefor it's not realistic for current EMC shareholders to simply claim the value of EMC should be higher on its own because the purchase relies on operating synergies between Dell and EMC. The Dell buyout by Silverlake is completely different, because throughout the sales process, it was clear that Michael Dell and Silverlake were not going to do anything to alter Dell's operational plan - that is, everything that Michael Dell and Silverlake were going to do to the company while private is pretty much exactly what the plan was had Dell remained public. So the judge decided to rule that Silverlake must have valued Dell at approximately what he ruled them to be. The case would be very different if Michael Dell/Silverlake were taking the company private and making major strategic changes to its businesses (shareholders could still sue, but the line of reasoning from the judge would be different).