Dell Said To Be In Buyout Talks With Private-Equity Firms

puddingebola writes "Dell Inc. is reported to be in buyout talks with private equity firms. From the story, 'Dell is discussing going private with at least two firms, said one of the people, who declined to be identified because the talks are private. The discussions are preliminary and could fall apart because the firms may not be able to line up the needed financing or resolve how to exit the investment in the future, the people said.'"

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Ask Hostess How Well That Worked Out

[ewhac]

We've seen this script before. The private equity firm forces the company to take out huge loans, which are then paid to the equity firm as consulting and management fees, and bonuses. Dell's largest operating cost becomes servicing the debt, which means everything else gets cut -- product research, product quality, staff, salaries. The market quickly realizes that Dell products have become shit(tier), and customers flee.

Four years later, the equity firm is several hundred million dollars richer, Dell goes bankrupt and is liquidated, and thousands of former Dell employees are out of work.

If you were a bank considering a loan to Dell (and not already in collusion with the private equity firm), you should be very very skeptical you will ever see your money again.