Question

What is a leveraged buyout? How and why did Michael Dell use a leverage buyout to regain control of Dell Computer?

Answer 1

Leveraged buyout is a successful acquisition of another company, where a significant amount of borrowed money is involved to complete the process of acquisition.

Dell was de-listed, Dell regained the control over his company by this leveraged buyout. He was owning only a 15% stake in his company but after the buyout he owns half of the stake in equity and three-quarters of the voting rights after committing $8 billion in cash and stock into this company. To manage the financing, Silver lake has arranged atleast 4 banks for example, Credit Suisse, Barclays, Royal bank of Canada sand Bank of America. After the buyout the fortune of Dell stood at $27 Billion. Dell's share price rose up and closed to $12,84 after the ammouncmenet of the buyout.

Dell was successful in remaking his company using private equity and with the help of his investor Silver Lake.