Michael Dell is strolling around the conference center 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
