Michael Dell is strolling around the conference centre in Davos today–looking quite sharp, as usual.
So are Steve Schwarzman and a number of other private-equity moguls, including some who may or may not be involved in the hot-and-heavy talks to take Dell private.
Michael Dell and the private-equity moguls, of course, won’t discuss the ongoing talks, even in the corridors at Davos.
But here are some questions that Michael Dell, especially, should be encouraged to answer:
- What are you going to do when you take Dell private that you aren’t doing now?
- Why don’t you just do that now–for your public shareholders?
We can, of course, speculate about what Michael Dell and his private-equity partners will do when they take Dell private:
- Borrow a huge amount of money (lever the company up)
- Use that money and the cash on hand to pay themselves a huge one-time dividend (probably recouping their entire purchase price and then some in the process)
- Fire thousands of employees and drastically cut costs
- Sell off some crappy or un-strategic businesses
- Sell the company back to the public-market shareholders at a much higher price than they are about to buy it from them for
- Smile all the way to the bank
That’s standard private-equity operating procedure.
Sometimes, if it’s done well, it actually improves companies, in addition to making the private-equity moguls rich.
Sometimes, if it’s done badly, it guts companies and overloads them with debt, so that they collapse within a year or two of being sold back to the public markets.
There’s nothing wrong with the good part of that.
But if that’s what Michael Dell and his private-equity backers plan to do with Dell when they buy it–if that’s the way to generate an awesome return for shareholders–why doesn’t CEO Michael Dell just do that now? What’s stopping him?
SEE ALSO: The Truth About Davos