NOTE 3—BUSINESS COMBINATIONS
Acquisition of Dell by Denali Holding
On October 29, 2013, Dell was acquired, for an aggregate GAAP purchase price of $24.1 billion for all of its outstanding shares, by Denali Holding, a Delaware corporation owned, upon the closing of the going-private transaction, by Michael S. Dell, the Chairman, Chief Executive Officer, and founder of Dell, and a separate property trust for the benefit of Mr. Dell’s wife, investment funds affiliated with Silver Lake Partners, the MSD Partners Funds, and certain members of Dell’s management. There was no contingent consideration related to this transaction, other than with respect to dissenting shares for which appraisal has been demanded under Delaware law, as discussed in Note 11 of the Notes to the Audited Consolidated Financial Statements.
Through January 29, 2016, the Company has incurred $335 million in transaction-related expenses. These expenses consist of professional fees and the reimbursement of certain expenses, which were approved by Dell’s former board of directors, incurred in connection with the going-private transaction. Of this amount, $23 million was incurred in the fiscal year ended January 29, 2016, $20 million was incurred in the fiscal year ended January 30, 2015, $120 million was recognized in the successor period ended January 31, 2014, and $172 million was recognized in the predecessor period ended October 28, 2013. These costs were recognized in selling, general, and administrative expenses in the Consolidated Statements of Income (Loss).
In addition, as of January 29, 2016, the Company expects to incur approximately $54 million in compensation-related expenses, net of forfeitures, that will be expensed through October 2018. These expenses will be recognized in cost of net revenue and operating expenses in Dell’s Consolidated Statements of Income (Loss). See Note 1 and Note 14 of the Notes to the Audited Consolidated Financial Statements for more information on these expenses.
The following table summarizes the purchase price of this transaction as of October 29, 2013:
| Purchase Price |
||||
| (in millions) | ||||
| Purchase price: |
||||
| Consideration paid |
$ | 19,664 | ||
| Equity rollover |
3,440 | |||
| Other (a) |
247 | |||
| Liability for dissenting shares (Note 11) |
770 | |||
|
|
|
|||
| Total |
$ | 24,121 | ||
|
|
|
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| (a) | Represents the fair value for which services were rendered as of the close of the transaction under share-based payment arrangements. |
- F-22 -
DENALI HOLDING INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
In connection with the going-private transaction, all of Dell’s assets and liabilities were accounted for and recognized at fair value on October 29, 2013, in the Company’s Consolidated Financial Statements. The following table summarizes the fair value of the assets acquired and the liabilities assumed by major class as a result of this transaction:
| Cost | Weighted-Average Useful Life |
|||||||
| (in millions) | (in years) | |||||||
| Intangible Assets: |
||||||||
| Amortizable intangible assets: |
||||||||
| Customer relationships |
$ | 10,776 | 6.6 | |||||
| Technology |
1,955 | 4.7 | ||||||
| Trade names |
334 | 6.5 | ||||||
|
|
|
|||||||
| Total amortizable intangible assets |
13,065 | 6.3 | ||||||
| In-process research and development |
141 | |||||||
| Indefinite lived intangible asset (Dell trade name) |
1,435 | |||||||
|
|
|
|||||||
| Total intangible assets |
14,641 | |||||||
| Goodwill |
10,005 | |||||||
| Cash and cash equivalents (a) |
11,040 | |||||||
| Accounts receivable, net |
6,274 | |||||||
| Inventories, net |
1,760 | |||||||
| Short-term financing receivables, net |
3,456 | |||||||
| Short-term investments and other current assets |
3,912 | |||||||
| Property, plant, and equipment, net |
3,002 | |||||||
| Long-term financing receivables, net |
1,610 | |||||||
| Long-term investments and other non-current assets |
916 | |||||||
| Short-term debt |
(1,399 | ) | ||||||
| Accounts payable |
(11,228 | ) | ||||||
| Accrued and other |
(4,146 | ) | ||||||
| Short-term deferred revenue |
(3,219 | ) | ||||||
| Long-term debt |
(3,418 | ) | ||||||
| Long-term deferred revenue |
(3,034 | ) | ||||||
| Other non-current liabilities |
(6,051 | ) | ||||||
|
|
|
|||||||
| Total |
$ | 24,121 | ||||||
|
|
|
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| (a) | Of the above cash and cash equivalents, $4.3 billion was used in connection with the financing requirements of the going-private transaction. |
The Company recorded $10.0 billion in goodwill related to this transaction. This amount represents the excess of the purchase price over the fair value of the assets acquired and liabilities assumed associated with this transaction. Goodwill is an asset representing future economic benefits arising from other assets acquired that are not individually identified and separately recognized.
- F-23 -
DENALI HOLDING INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
