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Michael Dell illustrates the private equity paradox

November 25, 2014, 8:55 PM UTC
Michael Dell Addresses Oracle Open World Conference
SAN FRANCISCO, CA - SEPTEMBER 25: Dell CEO Michael Dell delivers a keynote address during the 2013 Oracle Open World conference on September 25, 2013 in San Francisco, California. The week-long Oracle Open World conference runs through September 26. (Photo by Justin Sullivan/Getty Images)
Photo by Justin Sullivan—Getty Images

Michael Dell yesterday wrote an op-ed for The Wall Street Journal, extolling the virtues of having taken his company private last year, alongside private equity firm Silver Lake:

“In Dell’s formative years, public markets provided capital enabling us to grow and thrive, as is the case for many companies. The problem is when customer and shareholder interests diverge. At Dell, we faced a confluence of factors in making the decision to end a 25-year run as a publicly traded company. These factors included the big opportunities ahead, the required pace of innovation and investment, and an affliction of short-term thinking that drove a wedge between our customer and investor priorities.”

One thing Dell doesn’t address, however, is the end-game.

Won’t Dell Inc. eventually have to return to the public markets, in order to provide liquidity to Silver Lake and its co-investors? And, if so, will it signal to prospective shareholders that the company plans to slow its pace of innovation and investment?

It’s a common rhetorical conundrum for private equity, which values privacy above all else — until it doesn’t.

At least for Michael Dell, there is a possible out: He has enough personal fortune to buy out his partners, thus keeping Dell private indefinitely. No word, however, on if that’s something he’d consider.

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