EMC fails to find a White Knight
EMC fails to find a White Knight

EMC has announced that the “Go Shop” period described in the Dell and EMC merger announced in October 2015 has now expired.

The Go Shop period was agreed as part of the acquisition between Dell, MSD Partners and Silverlake and their takeover target EMC. The agreement allowed for EMC to see if it could get a better offer than that which Dell and its backers had made.

Dell and EMC: A deal doomed from the start?

According to an October report in Forbes, the Dell, EMC deal was doomed from the start. The report in Forbes is not the only one that has described the deal as unlikely to complete. In November re/code claimed that a tax burden of $9 billion would be due to the way that the deal has been structured. While that report cited anonymous Dell executives as being concerned it has not stopped the deal from proceeding.

The news of no better offer will be disappointing for EMC who had hoped that perhaps there were other big spenders who might make an offer for it. Despite the size of the offer and the fact that it is the biggest deal in the history of the tech market, EMC believed that there was someone out there willing to pay more.

All of our knights are busy

Unfortunately for EMC the other possible bidders had reasons not to take get involved. It’s hard to see a technology company that would not have problems with regulators should it choose to acquire EMC. IBM would have issues around storage while Microsoft would have to spin off the cash cow that is VMware. HP meanwhile just doesn’t have the money and despite splitting itself into two companies it is more of an acquisition target than an acquirer.

That leaves Oracle and Huawei. Oracle is finally beginning to understand the power of cloud and it would be foolish to think that they have ignored the possibilities that EMC offers. The purchase of Sun Microsystems was intended to allow Oracle to build computers that were optimised for its database system. It took longer than expected for Oracle to begin to show the benefits of that acquisition.

Acquiring EMC would give Oracle a major footprint in storage and enable it to optimise the high-end EMC systems for its core software products. If would also give Oracle a significant boost in terms of the cloud by taking advantage of VMware. The question is whether it is prepared to spend the money fighting Dell for EMC and the answer is probably no.

Huawei would find it hard to raise the finance to acquire EMC for its Enterprise division. There would be a lot to gain by Huawei if they made this move although they could run into issues with the US and some other governments who don’t trust the company.

The deal is still on for completion between May and October 2016 and there is still time for other bidders to come in. While the initial belief was that Dell only wanted EMC in order to acquire Vmware, it would gain from absorbing the entire company. But other bidders might not have the same aims. We might see a coalition of technology vendors enter the market all looking at different parts of the wider EMC business.

Conclusion

The board of EMC has not yet committed itself fully to this deal with Dell. Until it does so there will always be an opportunity for another bidder to enter the market. In order to do so they would have to produce what is termed a ‘Company Superior Proposal’ that would require the EMC board to stop its work with Dell and begin to engage with the new proposal.

The likelihood of that happening now is remote and despite the hurdles around tax and the potential cost of integrating Dell and EMC, it looks as if Michael Dell’s bid to expand Dell is still on track.

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