Onetime Dell Favorite Morgan Stanley Shut Out on Fees

Morgan Stanley, once the preferred takeover adviser of Dell Inc., missed out on a role on the biggest technology buyout since the financial crisis, depriving the firm of a share of more than $100 million in fees.

The bank trails only Goldman Sachs Group Inc. in advising on technology deals over the past 15 years, according to data compiled by Bloomberg. Until now, Morgan Stanley was Dell’s most used M&A adviser and provided counsel on the biggest deal in the personal-computer maker’s history -- the $3.6 billion purchase of Perot Systems Corp. in 2009, the data show.

Silver Lake Management LLC and Michael Dell agreed today to buy the Round Rock, Texas-based company in a deal valued at $24.4 billion. Goldman Sachs won a role providing guidance to Dell, while JPMorgan Chase & Co. and Evercore Partners Inc. advised the special committee of the board. That makes Morgan Stanley the only one among the top four advisory banks that isn’t involved.

“Missing out on it is a big embarrassment for Morgan Stanley even though it won’t hurt the bank’s bottom line in the long run,” said Brad Hintz, bank analyst at Sanford C. Bernstein & Co. in New York. “A large deal like this is like a delayed Christmas gift for Wall Street.”

Mary Claire Delaney, a spokeswoman for New York-based Morgan Stanley, declined to comment.

Credit Suisse Group AG, Barclays Plc, Bank of America Corp. and Royal Bank of Canada may get $40 million for their work advising Silver Lake, while Goldman Sachs, JPMorgan and Evercore stand to reap as much as $62 million for helping Dell and the board, according to researcher Freeman & Co. Credit Suisse and JPMorgan hold third and fourth place in the advisory ranks on technology deals, respectively.

Bridge-Loan Fees

The group including Bank of America, Barclays, Credit Suisse and Royal Bank also may get as much as $400 million in bridge loan underwriting fees, according to estimates by Lam Nguyen, vice president at New York-based research firm Freeman & Co. The total of $102 million in advisory fees alone compares with $2.53 billion that banks got from LBOs last year and $3.16 billion in 2011, according to Freeman data.

In addition to the Perot acquisition, Morgan Stanley advised Dell on its takeover of MessageOne Inc. in 2008 and the purchase of Convergenet Technologies Inc. in 1999, according to data compiled by Bloomberg. JPMorgan had previously never advised Dell on a takeover, the data show.

Typical Fees

Banks typically earn about 0.25 percent of the deal value for advisory work in big transactions like Dell, according to Freeman & Co. That number can go up to as much as 3 percent as deal size gets smaller. In an LBO deal, banks charge a slightly lower fee in exchange for repeat business brought by the same buyer.

Taking Dell private will remove it from much of the public scrutiny that sent the shares down by almost one-third in the 12-month period before Bloomberg reported the takeover discussions. Dell has struggled with shrinking demand in its PC division and has lagged behind peers in shifting to mobile and cloud computing.

The biggest technology LBO on record was KKR & Co.’s acquisition of credit-card processor First Data Corp. in 2007, a deal valued at more than $25 billion, according to data compiled by Bloomberg.