September 25, 2009 3:05 PM
Dealmaker of the Week: Robert Kimball of Vinson & Elkins
Posted by Matt Straquadine
Dell Computers, the hardware retailer founded by Michael Dell in a dorm room at the University of Texas in 1984, has enjoyed stretches of explosive growth since its inauspicious beginnings. When Dell first cobbled together his company (then called PCs Limited) he had a $1000 budget. By 2008, the company had revenues north of $61 billion.
But the latest recession has been tough on Dell Computers. Sales have dropped, as people and companies are making due with older PCs, while they wait for the economy to improve. Meanwhile, rivals IBM and Hewlett-Packard also have seen sales fall off, but have enjoyed steady revenue streams thanks to their computing services divisions, a business Dell hadn't yet entered.
That's set to change with Dell's announcement on Monday that it will purchase Perot Systems, a leading computing services provider founded by Texas billionaire and erstwhile presidential candidate H. Ross Perot. The price? An eye-watering $3.9 billion in cash -- a 68 percent premium over Perot's stock price before the deal.
Running point on the acquisition was Dell's longtime dealmaker, Robert Kimball of Texas firm Vinson & Elkins. The firm first started representing Dell on corporate matters in 1988, after advising Goldman Sachs on Dell's IPO. Kimball became the relationship partner for the client in 1992 and has handled a number of acquisitions for Dell since then, including what was until a week ago its largest deal ever, the purchase of EqualLogic in 2007 for $1.4 billion. This week's Perot buy is more than twice as large.
The consensus in the business press is that the buy makes good sense. Bloomberg points out that the new services business will generate at least $8 billion in sales per year for Dell. Dealbook reports that service businesses tend to have much higher profit margins than hardware sales. The Wall Street Journal, noting the high price paid by Dell, describes the purchase as a "striking move."
The deal between Dell and Perot also has M&A lawyers buzzing, both for its synergies and as a signal that the economy may finally be returning to sunnier times. Paul Ginsberg, the cohead of the M&A group at Paul, Weiss, Rifkind, Wharton & Garrison, says, "It's good to see this kind of activity in the tech sector. It shows confidence that corporate spending in systems and infrastructure will return."
As for the work, the negotiations went smoothly, according to Kimball. "Dealing with opposing counsel [at Baker Botts], and with inside counsel was great," he says. "There was quite a team on both sides, and everyone worked hard to get this one done." Still, Kimball's not ready to slow down just yet, saying he's too busy to take any time off right now. And he's fine with that.
"After what the capital markets were doing, and the downturn in acquisitions [through the recession], I'm not going to complain about being too busy."Make a comment