Gail Weinstein is senior counsel in the corporate department at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Scott B. Luftglass, Robert C. Schwenkel, and Steven J. Steinman. This post is part of the Delaware law series; links to other posts in the series are available here.
In Appraisal of Dell Inc. (May 31, 2016), the Delaware Court of Chancery awarded an appraisal amount ($17.62) that was 30% higher than the price that was paid in the $25 billion merger ($13.75) in which Michael Dell (the founder, CEO, and 16% stockholder of Dell) and private equity firm Silver Lake Partners took Dell private. In the merger, Mr. Dell, having rolled over his equity and invested $750 million of cash, obtained 75% ownership of the company. The court utilized a discounted cash flow (DCF) analysis to appraise Dell’s “fair value” for appraisal purposes (i.e., the going concern value of Dell at the time of the merger, excluding the value of any expected synergies), having concluded that, in this case, the merger price was not a reliable indicator of fair value.