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Elliott Management’s Strong Role in Dell’s Buyout of EMC

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Elliott management’s standstill agreement

Previously in this series, we discussed Dell’s (DELL) proposed acquisition of EMC Corporation (EMC), including VMware (VMW), in what would be the largest acquisition deal in the technology sector to date. This news also holds special importance because, according to the Wall Street Journal, EMC’s $67 billion proposed acquisition by Dell is an equally big deal in the shareholder activism space.

Elliott Management, an activist investment firm, took a $1 billion stake worth ~2% in EMC in 2014, with the likely intention to urge EMC to spin off its 80% share in VMware. Under its “federal” structure, EMC, VMware, Pivotal, VCE, and RSA Security are all independent businesses that function together as a corporate entity.

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In prior series, we also discussed how Elliott Management had been pressuring EMC to change its federal structure. However, Elliott Management agreed to a “standstill agreement” until September 2015. As we can deduce from Dell’s recent announcement to acquire EMC, EMC finally had to give into Elliott Management’s pressure.

Second-biggest deal by shareholder activism

In terms of value, the Dell-EMC deal comes in second to Allergan’s $73 billion sale, which was finalized in March 2015. Allergen’s sale was the biggest deal since 2009 to follow shareholder activism, according to the Wall Street Journal’s Activism Report Card. According to the Journal’s study, in a survey of 71 campaigns, only seven deals pushed by activists became successful.

Shareholder activism dominant company splits

Shareholder activism continues to play a dominant role in the breakup of the companies seeking to unlock shareholder potential. Technology firms like eBay (EBAY), the Hewlett-Packard Company (HPQ), and Symantec Corporation (SYMC) have also succumbed to pressure and announced splits.

You can consider investing in the PowerShares QQQ Trust (QQQ) to gain exposure to the technology sector. The ETF invests about 54% of its holdings in the technology sector.

Continue to the next part of this series for a look at what led Dell to consider acquiring EMC—and why it’s in EMC’s interest.

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