Evaluating the Deal Value of Dell’s MBO with EV/EBITDA

Background

This Excel template provides a method to value private companies and M&A by using EV/EBITDA. It took the M&A deal of Dell Computer as an example.

In 2013, Michael Dell succeeded in the MBO on Dell Computer. At that time, Skylake Private Equity Fund and Microsoft participated helped him as equity co-investors. And more than eight large banks created huge syndication loans to form an LBO.

For explanation, it extracted the normalised EBITDA of Dell Computer from the financial statements for the past ten years. Four competitors were chosen to get the EV/EBITDA of the peer group. The calculation made the operating EV, and adding the value of non-operating assets to it yielded the total EV. Finally, it figured out the equity value by using the net debts of Dell Computer. That was what Michael Dell and his corps of investors should have paid to the owners from the present viewpoint.

Using the market data as of Sep 2020, it estimates the deal value for 2013. You can use the results to judge whether the deal value was cheap or expensive, or just average.

 

 

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Step 1

 

 

This has been dragging ten years of data to find the Dell Computer’s EBITDA. Dell Computer was generating stable turnovers and operating incomes. Therefore, we believe it would be possible to estimate the future performance using the past ones.

 

 

Step 2

 

 

It has found comparable companies of Dell Computer through Yahoo Finance. It filtered six companies and chose four companies at last, Lenovo, HP, Acer, and Asus.

 

 

Step 3

 

 

This is the most crucial sheet. Dell Computer’s operating EV came out. And then adding the value of non-operating assets, we’ve got the total EV. Finally, it subtracted the net debt from it to calculate the equity value, which is the value the buyer should pay to the owner.

 

If you compare the EV and the equity value calculated in this sheet to the actual deal value in 2013, you can see whether Michael bought Dell computer expensive or cheap.

 

 

 

Download: Download Excel Financial Model

The template is organised as follows.

  1. Cover page
  2. Major financial indicators for the past ten years of Dell Computer
  3. Four comparable companies and their market data
  4. Calculation of EV and Equity Value for DELL Computer

 

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