Dell's chances of making significant progress on the road to revitalization are not great

Summary: In a Tuesday article published in the online edition of Fortune magazine, the company's founder Michael Dayer and private equity firm Silver Lake will have greater autonomy by privatizing Dell, because they will not have to make Wall Street investors feel

In a Tuesday article in the online edition of the Fortune magazine, the company's founder, Michael Dell, and private-equity firm Silver Lake will have greater autonomy by privatizing Dell, because they will not have to satisfy Wall Street investors. But the article points out that Dell is unlikely to make significant progress on the road to revitalization, and that the company needs to innovate over a two-year period to revive quickly.

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The road ahead of Dell's company is not gone. Investor groups headed by Michael Dell, the company's founder, plan to privatize the company through a 24.4 billion-dollar deal that would allow them to try to revive the company without pressure from Wall Street, in all the good work. This is one of the standard strategies behind leveraged buy-out deals, and Dell's privatisation is one of the biggest leveraged buy-outs. However, from the experience of many companies that have experienced this process, success is far from standard.

Many companies have prospered, such as disk-drive manufacturers Seagate Technology, gas pipeline company Kinder Morgan and DoubleClick, an online advertising company that has been bought by Google. But at the same time, many companies are in trouble or bankruptcy, including hotel operators extended Stay America and newspaper Chain Operators Forum (Tribune Company). "The results are mixed. "Steven Keplan, professor of entrepreneurship and finance at the University of Chicago," said Steven N. Kaplan.

Reviving a troubled company is, of course, a difficult task, regardless of the ownership of the company. Shutting down or selling their departments, cutting staff and managing changes will be typical measures. But leveraged buy-out fairs add to the burden on companies saddled with debt. If a company's business encounters an unexpected bond, it would be annoying for the company to have to pay interest on its debt while maintaining regular business operations.

The problem for Dell is that the company's PC business is shrinking because customers are increasingly turning to buying PCs from other manufacturers, or buying smartphones and tablets. As an alternative, the company is trying to shift its focus to enterprise services and cloud computing, much like IBM's approach. However, the process of such transition is very slow. The question that analysts are increasingly sceptical about is whether the strategy will work.

Dell and private equity firm Silver Lake will gain full control of the leveraged buy-out deal, and the investor group has yet to disclose any details about what will be done in the future. But they will take more drastic steps to revive Dell, according to Broad market expectations. By privatizing companies, they will have greater autonomy because they will not have to be satisfied with Wall Street investors, and investors will inevitably focus on short-term financial performance. "There are a lot of very well-funded competitors on the market. "David Larcker, a professor at Stanford University Business School, David Lacle about Dell and its prospects as a private company to revive. "I don't think [Dell's privatisation] would be a slam dunk," he said. ”

The number of privatized listed companies has been decreasing in recent years. The lack of bank funding after the recession has made it difficult for companies to borrow the necessary cash, especially for large-scale mergers and acquisitions. The specifics of each leveraged buyout deal are unique--no matter what the times--which means it's hard to generalize about all leveraged buy-outs. But it is clear that the results of these deals will be largely different.

For example, Hellman & Friedman and JMI Equity, the two private equity firms that bought DoubleClick at $1.1 billion in 2005, was one of the first successful companies in the Internet, but lost momentum after the dotcom bust. The two private-equity firms privatized DoubleClick, sold some assets and revitalized their core advertising-market operations, and three years later, the two companies sold DoubleClick's core business to Google at 3.1 billion-dollar price, means that they have received significant returns in this privatization process.

But on the other hand, Haleth Entertainment, one of the world's largest casino operators (Harrah ' s entertainment), can be a case study of a leveraged buyout deal. In 2006, the two private equity firms, Apollo Global Management (Apollo Global Management) and the Texas Pacific Group (Texas Pacific Group), bought the casino operator at a price of nearly 27.6 billion dollars, and in the near future, The economy and tourism are in trouble. After privatisation, the company still faces significant debt pressures, and the company has since been renamed Cesar ' s entertainment.

In many ways, Dell's leveraged buy-out deals will be different from most other companies. First, the deal is led by the company's founder, Michael Dell, who plans to put 700 million of billions of dollars into the company, and he could spend more if necessary. In addition, Microsoft will offer Dell a 2 billion dollar loan, which relies on Dell's customers as an important source of software sales. If Dell fails to repay the loan on a predetermined date, the loans from Microsoft may be more flexible than bank loans (while competitors ' response to Microsoft's move is quite different).

Dell's partner, Silver Lake, has a long track record in leveraged buy-out deals in the technology industry. Silver Lake was responsible for dealing with Seagate Technology and the privatisation of Skype, an online telephone service, and Avaya, a corporate telecoms company. Traditionally, private-equity firms have been targeting companies with steady cash flows-with the aim of better debt repayment-and the acquisition of physical assets such as hotels, airlines and retail companies, because they can be used as collateral or easy to sell. But over the past 10 years, private-equity firms have added technology companies to their takeover targets.

The ultimate reward for leveraged buy-out investors is to revive a company first and then return it to the market, which will allow them to cash in and pay far more than the initial investment. Maria Nondorf, a professor of accountancy at the University of California, UC, says Maria Nandauf's chances of making significant progress on the road to revitalization are not great, and if it fails to revive, the company will lag far behind in catching up to many of its rivals. It may take five to seven years for investors to withdraw and get a return on their investment.

"They need a speedy recovery that can take up to a year or two years." Nandauf explained. "The company will have to innovate to do things that companies like IBM have not yet done." ”