Almost from the start, Steven Rosenblum, an M&A partner at Wachtell, Lipton, Rosen & Katz, knew that advising Dell Inc. founder Michael Dell on his buyout of the struggling computer company would be a tough assignment. Not only would he have to help his client work with Silver Lake Partners
to buy the nearly 84 percent stake in the company he did not already own, he’d have to face down serious threats from activist investors and a rival bidder, The Blackstone Group. And perhaps trickiest of all, he’d have to help Dell, the company’s chairman and CEO, fulfill his obligation to investors to opt for the strategy that provided them with the most value, even if that meant voting his shares in favor of someone else’s offer—and, by extension, voting himself out of the company.
“Michael was ready to partner with whatever firm would pay the highest price. He was not bound to Silver Lake,” Rosenblum says, adding that Dell talked with multiple private equity firms before siding with Silver Lake, which was advised by Simpson Thacher & Bartlett.
Michael Dell brought on Rosenblum shortly after approaching his company’s board in August 2012 to discuss a plan to take the company private. The CEO’s initial deal with Silver Lake, announced in February 2013, valued Dell at $13.65 per share (the company’s shares had been selling for less than $9 each before reports of a possible deal leaked in January), but the CEO was also in favor of a go-shop provision that gave the special committee an opportunity to seek out higher bids. (Debevoise & Plimpton represented the special committee.)
Rosenblum helped guide Michael Dell through that go-shop period as two rival interests entered the picture: Blackstone and activist investor Carl Icahn. Dell worked with Blackstone to see if a topping bid materialized—according to Rosenblum, the CEO spent more time with Blackstone during this due diligence process than he had with Silver Lake during the same process in 2012—but Blackstone was ultimately scared off by the company’s eroding finances.
Icahn, meanwhile, started buying up a sizable minority stake in the company in March 2013. Along with fellow investor Southeastern Asset Management, he called on shareholders not to vote their shares for the buyout, which he said undervalued the company, while proposing such strategic alternatives as a $15 billion stock buyback.
“It ultimately became clear that Michael needed to get his story out about why he had started this process going in the first place,” says Rosenblum. He helped Dell respond to Icahn with a letter to shareholders, as well as interviews with Bloomberg and The Wall Street Journal. To sweeten the pot, Dell and Silver Lake also raised the offer price by 10 cents per share, to $13.75.
Part of Icahn’s leverage in the shareholder vote stemmed from a rule, opposed by Michael Dell, that would count shares not voted as votes against the merger, handing an advantage to those opposed to the deal, since more than 25 percent of the unaffiliated shares abstained. The special committee held firm against a change to the voting rules without a greater increase to the offer price, forcing Michael Dell to adjourn three shareholder meetings when it became clear the deal did not have enough votes. Between the argument over the price and an Icahn lawsuit seeking to force a vote, the buyout seemed to be “pretty close” to falling apart, Rosenblum says: “There’s this sense of: ‘Are we really going to lose this over a few cents per share?’”
Ultimately, Rosenblum helped Dell and Silver Lake negotiate an amended agreement that raised the offer to $13.88 per share by including a special dividend of 13 cents per share. In exchange, the special committee agreed to alter the voting standard to no longer count nonvotes for the opposition.
With that measure in place, Icahn dropped his opposition to the Dell–Silver Lake deal days before it would win shareholder approval in early September—more than a year after the CEO first explored his plan to take the company private.
Several months later, Dell still speaks glowingly of Rosenblum’s contribution to the deal. In an e-mail sent to The American Lawyer, the CEO wrote: “Steve played a central role, communicating with me throughout the process with all the twists and turns, as my most key adviser, providing steady, reliable and well-reasoned advice at every step of the way with the clear priority of getting the deal done. At critical times during the process, Steve’s counsel and ability to build consensus were at the forefront of an epic effort and a fantastic result.”