EMC Gets the Premium Dell Shareholders Wanted: Tara Lachapelle

Move over, Avago. There’s a new king of massive tech mergers.

The official price of the Dell-EMC transaction is finally here. And at $64 billion, it’s making this year’s $30 billion deal between chipmakers Avago and Broadcom -- which for five months held the title of biggest technology merger ever -- now appear small. (All figures include most recently reported net debt.)

It even mocks Dell’s own LBO valuation. Founder Michael Dell and buyout firm Silver Lake Management took Dell private two years ago at a price worth about 5 times the computer maker’s Ebitda. Now, in a sequel to the buyout, Dell is acquiring data-storage company EMC and paying 12 times Ebitda -- a 140 percent premium to what its own shareholders got.

The two takeaways are this: First, takeover prices have been incredibly rich throughout 2015, all the way to the tail end of the year. So much for the idea that market turbulence would result in more modest prices and potentially initiate an M&A slowdown.

Second, Dell is the latest proof that public shareholders tend to get bigger windfalls from strategic acquisitions than buyouts by shrewd private-equity firms or chief executives.

EMC has 60 days to find other acquirers willing to strain their balance sheets and stretch for an even higher price than Dell has offered. Don’t count on it finding any. No CEO in this industry is eager to be the next Carly Fiorina, and most are focused on slimming down instead of bulking up, as Dina Bass and Brian Womack pointed out in their story for Bloomberg News last week.

But if a competing bidder does emerge, you’ve got to wonder if the takeover of EMC starts to look like another three-letter deal disaster: AOL.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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