Tuesday, October 13, 2015

Can Dell Handle the Debt?

As reported earlier, Dell has announced that it will be acquiring EMC for approximately $67 billion. Many are skeptical of the deal, as it introduces quite a bit of debt to Dell's balance sheet (estimated $50 billion).

We crunched some numbers quickly, and we see why this deal was attractive to Dell. We also believe they shouldn't have an issue with the debt load as long as it's business as usual (which we agree, is always a risk).

Our belief is also reinforced by the fact that Silver Lake Management has been rumored to be providing additional equity on this deal. Silver Lake is the same firm that helped Michael Dell raise enough cash to take Dell private in 2013. Given that they've made a nice return on the original deal, it appears they are confident they can do it again.

As always, time will tell.

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