Business administration group 2 kt47c1 mid term paper behaviors of businesses in the globalization era the dell emc merger and acquisition case study. Introduction: In recent decades, globalization has grown tremendously and become an inevitable trend. This trend strengthens the international connections, and creates links, effects, and interdependence among countries and regions. There are many ways to explain the meaning of globalization, but there is a comprehensive one: “Globalization is a process that minimizes burdens among countries and encourages the interdependence in economy, politics and society”. This process happens in every aspect such as: economy, culture, politics, society, environment and economy is a very crucial part. Economic globalization enhances international activities without borders and promotes the interaction and interdependence among countries. There are some characteristics of globalization. Firstly, globalization enhances the commercial activities among countries. International trade helps countries achieve their economic benefits because in this environment, these countries have to eliminate commercial and tax burdens, unfair discrimination. Some nontariff measures like quotas, import licenses, regulations about quality, originality, sanitation were also mentioned in this round and the WTO implemented some policies to eliminate these measures, leading to a fair competition and more commercial trades. Secondly, globalization facilitates the new financial and commercial organizations in the world. In terms of world organizations, the IMF (international monetary fund) enhances economic development and aids financial support. The WB (world bank) provides loan programs to developing countries to promote economic development. The WTO (world trade organization) creates a transparent, equal and free commercial market for more than 160 countries around the world. In terms of regions, the EU is the most outstanding organization that includes 27 members and considered to be an economic, political group having a deep connection with each other. Thirdly, multinational companies and transnational corporations have developed dramatically and had an important role in promoting globalization. Not only do these affect the world economy but they also have a great impact on regional development, international trade and investment, technology transfer and labor force. Thanks to the greater power, multinational companies and transnational corporations have been expanding their influence and control in some sectors like: finance, technology, service and labor. Overall, this system of companies has developed the world manufacturing process, and strengthened the interdependence among countries tightly.
DIPLOMATIC ACADEMY OF VIETNAM FACULTY OF INTERNATIONAL ECONOMICS - - MID-TERM PAPER MODULE: BUSINESS ADMINISTRATION Topic: Behaviors of businesses in the globalization era & The Dell – EMC merger and acquisition case study Advisor: Assoc Prof Đặng Hoàng Linh Student: Group – KT47C1 1) Nguyễn Nhật Anh _ CT47C1 – 0005 2) Đỗ Ánh Dương _ KT47C1 – 0156 3) Nguyễn Thị Ngọc Quỳnh _ KT47C1 – 0165 Hanoi, March, 20th 2023 TABLE OF CONTENT I Globalization and companies in globalization .1 1.1 Globalization 1.1.1 The definition of globalization 1.1.2 Globalization’s effects 2 Companies in globalization .3 1.2.1 Manufacturing factors 1.2.2 Technological factors II Site Selection (Investment Environment) 2.1 Socio-economic environment and the stability of macro environment 2.2 Natural factors 2.3 Labor force 2.4 Infrastructure 2.5 Legal environment and investment attract policies III Types of foreign capital investment 3.1 Joint venture 3.2 Enterprises with 100% foreign capital .5 3.3 Business Cooperation Contract 3.4 BOT - BTO - BT contract form 3.5 Export Processing zone, Industrial Zone and High -Tech Zone 3.6 Mergers and Acquisitions – M&A .7 IV Dell & EMC Corporation Merger and Acquisition Case Study .8 4.1 The Overview of Dell & EMC Corporation M&A Deal 4.2 Analysis and evaluation of the M&A deal between Dell and EMC 12 REFERENCES 19 I Globalization and companies in globalization 1.1 Globalization 1.1.1 The definition of globalization In recent decades, globalization has grown tremendously and become an inevitable trend This trend strengthens the international connections, and creates links, effects, and interdependence among countries and regions There are many ways to explain the meaning of globalization, but there is a comprehensive one: “Globalization is a process that minimizes burdens among countries and encourages the interdependence in economy, politics and society” This process happens in every aspect such as: economy, culture, politics, society, environment and economy is a very crucial part Economic globalization enhances international activities without borders and promotes the interaction and interdependence among countries There are some characteristics of globalization Firstly, globalization enhances the commercial activities among countries International trade helps countries achieve their economic benefits because in this environment, these countries have to eliminate commercial and tax burdens, unfair discrimination Some non-tariff measures like quotas, import licenses, regulations about quality, originality, sanitation were also mentioned in this round and the WTO implemented some policies to eliminate these measures, leading to a fair competition and more commercial trades Secondly, globalization facilitates the new financial and commercial organizations in the world In terms of world organizations, the IMF (international monetary fund) enhances economic development and aids financial support The WB (world bank) provides loan programs to developing countries to promote economic development The WTO (world trade organization) creates a transparent, equal and free commercial market for more than 160 countries around the world In terms of regions, the EU is the most outstanding organization that includes 27 members and considered to be an economic, political group having a deep connection with each other Thirdly, multinational companies and transnational corporations have developed dramatically and had an important role in promoting globalization Not only these affect the world economy but they also have a great impact on regional development, international trade and investment, technology transfer and labor force Thanks to the greater power, multinational companies and transnational corporations have been expanding their influence and control in some sectors like: finance, technology, service and labor Overall, this system of companies has developed the world manufacturing process, and strengthened the interdependence among countries tightly 1.1.2 Globalization’s effects 1.1.2.1 Positive effects Firstly, the competitiveness among companies, economies will be enhanced significantly When national corporations join the global market, they will compete with others fiercely so in order to advance the competitive ability, these companies have to oblige international manufacturing standards, improve productivity and quality of products to meet the global customers’ demands As a result, customers are likely to buy high quality products with reasonable prices Secondly, more investments will create more jobs for laborers Globalization helps developing countries receive international investments by various ways such as FDI, FII or ODA The amount of money invested has risen tremendously year after year, especially the developing countries that attracted nearly half of the total international capital by more than 700 billion dollars, which was much higher than developed ones Lastly, countries have more opportunities to access up-to-date technology Globalization positively affects technological innovations thanks to transferring activities, then narrowing the technological gap between the developing and developed countries Accessing modern inventions ensures the manufacturing development, the quality of products, and management skills 1.1.2.2 Negative effects In spite of having some benefits, globalization also has some drawbacks as well Firstly, the rich and poor gap will widen among countries This process has been proved to bring economic advantages for every country, but these not allocate equally The bigger the countries are, the more benefits they gain because they have great fundamentals in many sectors, which the poor ones not have Recently, the developed countries are reported to occupy only nearly 20% of the world population, but own 71% of the assets and international trade, 58% of the total foreign direct investment and 91% internet users Secondly, unemployment, bankruptcy, social conflict due to tough competition will result in some undesirable consequences to the economies The growth of globalization means higher unemployment rate in developed countries because the labor force in developing countries have some advantages like: low salary, low labor welfare This consequence will raise social welfare for the unemployed, which decreases the state budget and becomes a burden for the economic development in rich countries In addition, interdependence is a double-edged sword that every country has to concern The more a country relies on outsiders, the more fragile they will face in crises This reliance shows in main criteria which are the proportion of commercial per GDP and international investment per total investment If a country’s economic development depends heavily on these 2 criteria, it will be vulnerable when facing unexpected situations like: disease, supply chain disruption, economic crisis Companies in globalization Nowadays, investors have been seeking new markets and destinations to not only expand their businesses but also maximize their profit A market that has attractive investing opportunities, good security will be the priority To find this appealing market, they need to understand clearly about manufacturing factors, and technology 1.2.1 Manufacturing factors Labor cost is not always the most important factor for a potential market because low labor cost means low productivity, backward technology For that reason, if companies want to invest in developing countries, the businesses are often suitable for low-skilled workers For example, some very appealing destinations attract international investors like Vietnam, which has a young and cheap labor force Moreover, natural resources are also a great concern because by exploiting them effectively, investors decrease the price of input materials That’s why some rich natural resources countries like Vietnam or Myanmar become very potential destinations for foreign investments 1.2.2 Technological factors Advancements in technology have considerably facilitated globalization In fact technological progress has been one of the main forces driving globalization Technological breakthroughs compel business enterprises to become global by increasing the economies of scale and the market size needed to break even Technological advancements reduce costs of transportation and communication across nations and thereby facilitate global sourcing of raw materials and other inputs Patented technology encourages globalization as the firm owning the patent can exploit foreign markets without much competition II Site Selection (Investment Environment) 2.1 Socio-economic environment and the stability of macro environment The stability of the socio-economic environment plays an important role in using and allocating the capital effectively Politics and economy have a strict connection with each other, so foreign enterprises pay a lot of attention to policies benefiting them A country having social conflicts, wars, terrorism will have difficulty in attracting foreign investments For that reason, a stable macroeconomic environment is the first priority for investors because their aim is to make profit in the long run with the least risk that they have to take 2.2 Natural factors Natural factors are available factors in each country, and they are also one of the development resources that attract foreign investment capital Natural factors include geographical location and natural resources Convenient geographical location allows for easy concentration of production facilities, expansion into surrounding markets, reduction of transportation costs, and utilization of other resources Natural resources are a strategic factor in policy development and economic sector structural construction Foreign investors are always drawn to countries with abundant natural resources Investors want to maximize benefits and production efficiency by effectively utilizing natural resources appropriate to the industry in which they invest 2.3 Labor force Labor force is the key factor in an enterprise's business activities, contributing to its success or failure Foreign investors when making investment decisions will pay attention to the quantity, quality and cost of the labor source they intend to use Welltrained, qualified employees with job-specific skills and the ability to collaborate with capable managers will result in increased productivity and efficiency 2.4 Infrastructure The initial basis for attracting foreign investment is infrastructure, which is a factor in promoting foreign investment activities to take place quickly and has a decisive influence on enterprise production and business efficiency Karma Many investors believe that this is the most important factor to consider when choosing an investment location Furthermore, the technical infrastructure includes support services such as banking, auditing, financial consulting, business, and so on These factors act as catalysts, assisting in the investment implementation process; without them, the investment environment would suffer greatly 2.5 Legal environment and investment attract policies Legal environment and investment attract polices are the most concerning factors, including: Firstly, there are the legal environments and policies attracting foreign investment, including: a healthy competitive environment, and private property ownership is legally guaranteed Secondly, administrative procedures must be transparent Thirdly, Profit division regulations and the right to "repatriate" profits for specific forms of foreign capital mobilization.monetary policy Finally, the legal system must demonstrate the basic content of the principle: respect for sovereignty, independence, equality, mutual benefit, and compliance with international practices At the same time, legal institutions must be established and improved to instill confidence in foreign investors III Types of foreign capital investment In the globalization environment, businesses not only strengthen domestic production and business activities but also conduct many forms of cooperation with foreign businesses such as joint ventures, 100% foreign-capital enterprises, cooperation contracts, BTO-BOT-BT contracts, acquisition and merger (M&A), 3.1 Joint venture Joint venture enterprises are formed when two or more foreign investors contribute a portion of their assets, rights, obligations, and legitimate interests to local businesses in order to form a new business Joint ventures are an appealing form of investment that many businesses are pursuing in the current integration trend A joint venture enterprise is a type of business that offers numerous benefits to both domestic and foreign investors: Firstly, businesses can access advanced technologies to improve product quality, innovate products, and increase domestic production capacity Secondly, domestic investors have the opportunity to learn and gain advanced management experiences Thirdly, domestic investors can benefit from both foreign investment capital and domestic advantages such as natural resources The strong development of international joint venture cooperation is a bridge between the domestic market and the global market, a driving force for the national economy's expansion and development 3.2 Enterprises with 100% foreign capital In terms of definition, enterprises with 100% foreign capital is a company owned by foreign investors, established by foreign investors in the host country, has legal status according to the law of that country, self -management reasoning and operating businesses and self -responsibility for business results Here are some typical features: Firstly, foreign investors invest in Vietnam for the first time to have projects and carry out procedures to be granted investment certificates Secondly, enterprises with 100% foreign capital may be established by one or more organizations and individuals and have legal status according to Vietnamese law Enterprises must comply with the laws of the country and equality with enterprises of all economic sectors Thirdly, 100% foreign capital enterprises are responsible for their business results This is a popular form of foreign investors because they can access the domestic market and completely control and manage businesses 3.3 Business Cooperation Contract In terms of definition, a business cooperation contract is a document signed between domestic investors and foreign investors, stipulating responsibilities for contract performance and dividing business results for each party to conduct business investment in a country that does not establish a new legal entity In the course of business, the parties of the contract are allowed to agree to set up a coordinating board to monitor and supervise the contract performance When establishing a business contract in Vietnam, the Vietnamese party is under the regulation of Vietnamese law under the newly promulgated enterprise law Business cooperation contracts help promote production capacity, create job opportunities and learn for workers However, this form only receives average technique, mainly investors exploiting abundant labor resources in the host country 3.4 BOT - BTO - BT contract form 3.4.1 Build - Operate - Transfer Contract (BOT) According to the provisions of the 2005 Law on Investment, Build - Operate Transfer contract (BOT) is a document signed between Vietnamese competent state agencies and foreign investors to build public business The technical infrastructure process for a certain period of time In this form, investors are responsible for conducting construction and business for a period of time to recover enough capital and reasonable profits After the project ends, the entire project will be transferred to the host country without collecting any money 3.4.2 Build - Transfer - Operate Contract Build - Transfer - Operate Contract (BTO) is a form of investment signed between competent state agencies and investors to build infrastructure works; After construction is completed, investors transfer that work to the State of Vietnam; The Government has for investors of such works business rights for a certain period of time to recover investment and profits With this form, after the construction is completed, the investor will transfer the project to the host country, and the investor will be able to business for a while at that project to recover enough capital and suitable profit 3.4.3 Build – Transfer Contract (BT) Build – Transfer Contract (BT) is a form of investment signed between competent state agencies and investors to build infrastructure works; After the construction is completed, the investor transfers that project to the State of Vietnam With this form, after the construction is completed, the investor will transfer the work to the host country Investors will be facilitated to implement other projects to recover enough investment capital or be paid under the contract In summary, according to the forms of investment under this contract, investors are responsible for the value of use and safety for their works for a period of time prescribed by the contract after transfer 3.5 Export Processing zone, Industrial Zone and High -Tech Zone Export processing zone, Industrial zone and High -Tech zone As a concentration area, enterprises specializing in manufacturing industrial products, products used for export, high -tech products and service activities for production activities of these businesses 3.6 Mergers and Acquisitions – M&A Merging enterprises is the two or more businesses transferring all their legitimate assets, rights, obligations and interests to another enterprise to have a larger value and scale After the merger, the merged enterprise ended its existence Buying is the form of a company that buys part of the property or all the assets of another company The purchased company can terminate the operation or exist as a dependent company M&A classification is based on the relationship between businesses that implement M&A, the M&A includes forms of horizontal merger, vertical merger, market expansion, product expansion, and corporate merger With this form, investors can quickly participate in the domestic market without spending time and capital to build infrastructure This is a reasonable choice for investors when the new investment in the host country is difficult However, the acquisition or merger of the enterprise requires a large capital source and a highly management team There are three main categories of mergers: Horizontal merger: A merger between companies that are in direct competition with each other in terms of product lines and markets Vertical merger: A merger between companies that are along the same supply chain Concentric Mergers: Occur between companies within an industry that serve the same customers but don't offer them the same products or services IV Dell & EMC Corporation Merger and Acquisition Case Study 4.1 The Overview of Dell & EMC Corporation M&A Deal 4.1.1 The context before the M&A deal The Dell-EMC merger has been one of the largest acquisitions in the technology industry In addition to its size, this merger was more complicated than the simple purchase of one company because an acquisition of EMC meant purchasing all of the subsidiary companies During October 2015 to September 2016, there were many announcements discussing everything from merger financing and predicted decisions of antitrust agencies, to projected dates of close Finally, on September 7, 2016, Dell Inc completed the merger and became the biggest tech deal in history 4.1.1.1 Companies Before The M&A Deal Computer technology giant Dell Inc: was an American private computer technology company situated in Texas, United States About 70 percent of Dell’s business related to its core business which was personal computers In 2014 it was the third largest PC seller in the world, and then in 2015, Dell showed 12.6 percent yearover-year growth and revenue of $2.3 billion which ranked the second in this industry with 18 percent market share Dell had not released earnings numbers since it went private in 2013, but back then its EBITDA was $4.5 billion and Dell’s cash flow has slipped since then EMC Corporation was an American multinational company which was a global leader in enabling businesses and service providers to transform their operations and deliver information technology as a service EMC was the world’s largest data storage systems’ provider based on market share In the first quarter of 2015, EMC finished in the top position within the worldwide enterprise storage system market, holding a market share of 17.4% and a total revenue of $1,531Million EMC reported an increase in the quarter 2015 by 1.99% year on year, while most of its competitors have experienced contraction in revenues by -4.36% In addition, they also faced tough competition from small enterprises specializing in cloud computing EMC was confronted with a risk of massive threat as rivals offered up-to-date drive solutions and technologies that affected profitability The competitors enhanced their technologies accessible through the cloud, reducing the market share of EMC’s high-end storage systems Antonio Conte, Head of M&A, Thea Wrobbel, M&A Associate TMT, Riccardo Pizzino, Head of Treasury & Legal, DELL & EMC - The Path to be Giants- M&A Reports https://financescp.net/2016/01/17/dell-emc-deal-ma-reports/, accessed on 16/3/2023 Picture 4.1.1: Emc Organization Structure Before M&A Source: Wall Street Research 4.1.1.2 Reasons why Dell bought EMC First, Dell would gradually dominate a part of the software industry and expand its business to hold a significant position in the data storage market Dell had to offer more up-to-date technologies through the infrastructure and client solutions group, and SecureWorks Corp,VMware Inc, Pivotal Software Inc Information security, and Boomi The M&A was the combination of the top providers of the significant storage devices and the leading personal computer developers Second, Dell’s hardware development did not have advantage in the information technology industry, while the production rates in the software sector were high with remarkable profit margins The M&A was a good investment because Dell would benefit from EMC’s centralized portfolios and have more impact on the cloudcomputing industry This could be seen from the M&A’s new contracts like reaching an agreement with General Electric, becoming its major IT infrastructure developer Hence, the acquisition provided considerable l product lines from hybrid computer systems Merging with EMC facilitated Dell to remain the dominant supplier for retail customers Consequently, the new combination named Dell Technologies became the world’s leading seller of storage devices, the second in developing servers, and the third company in providing personal computers Third, Dell Technologies aimed to diversify Dell’s technology portfolio including hybrid cloud, software-defined data center, converged infrastructure, cybersecurity, data analytics, and mobility Dell/EMC has developed a various portfolio with more than 20000 applications and patents, resulting in a vast and privately controlled technology company Besides that, Dell wanted to merge with EMC because it demanded flexibility in innovations and investment in research and development Consolidation has united Dell and EMC’s operations to ensure adaptability in the market 4.1.2 Progress of the M&A Deal On October 12, 2015, Dell Inc announced its intent to acquire EMC Corp The merger would take the data storage company private but leave its cloud-storage subsidiary VMware to be traded on the public market On February 22, 2016: The purchase was approved from the U.S Federal Trade Commission On June 7, 2016: EMC announced a special shareholders meeting that will finalize the purchase on EMC's end On July 19, 2016: EMC's shareholders voted to approve the acquisition The vote by approximately 74 percent of shareholders was 98 percent in favor of the merger The combined company will continue to be called Dell On September 7, 2016, Dell Inc completed the merger with EMC Corp (which later became Dell EMC) 4.1.3 The Formation Of M&A Deal 4.1.3.1 M&A type The Dell-EMC merger was an interesting case when talking about the M&A type because it had some characteristics of both vertical and horizontal M&A Despite the overlap in products, this acquisition was mostly vertical in nature Although both companies had a large stake in the computer storage market, Figure demonstrated that even within this aspect of their businesses, the two companies had differing specializations Dell concentrated on more consumer-oriented, smaller price band storage which provided them with a larger market share than EMC in storage priced from $0 up to $25,000 On the other hand, EMC’s main focus was in large enterprises which had higher price-band storage They exceeded Dell’s market share in storage priced from $25,000 to $250,000 10 Figure 4.1.3: Dell vs EMC Storage Market Share by Price Point Source: IDC WW Storage Systems Tracker Instead of the overlap in entry-level and mid-range storage, the two enterprises differed in the products they offered Dell’s main products included desktops, laptops, tablets, gaming consoles, printers, monitors, software, and various other computer accessories These could be purchased by the individual consumer in single quantities or by companies in bulk On the other hand, EMC offered very little in the way of individual consumer products Their product list included cloud management software, cloud storage, data protection software, information security packages and more–all of which were aimed largely at businesses rather than individual consumers Due to the different markets of these two companies, the merger was mainly vertical 4.2.3.2 Leveraged Buyout A leveraged buyout (LBO) is the acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company2 4.1.4 The Result Of M&A This deal was very massive and cost 67 billion dollars, so to meet this amount of money, Dell sold off many valuable assets, billions of dollars in unsecured junk bonds, shares of other companies, etc Consequently, at that time, Dell Technologies was the world’s largest private technology company In 2016, it boasted 74 billion dollars in revenue, with over 140,000 employees, 30,000 full-time customer service, and support team members, located in 180 different countries The achievement of the Dell and Investopedia, Leveraged Buyout (LBO) Definition: How It Works, with Example Forbes, Dell Technologies One Year In: How Are They Performing And How Did They Do It?, accessed on 10/3/2023 11 EMC deal will be coming down the road, so it’s important to look at what Dell Technologies did within the first year of getting the deal done While critics of the initial merger stated that Dell would have cash flow problems, the new company has already paid down $9.5B, driven in part by free cash flow and the sale of Dell Services, Software and Enterprise Content totaling 5.3 billion dollars Picture 4.1.4: Dell’s organization after the deal Source: Wall Street Research 4.2 Analysis and evaluation of the M&A deal between Dell and EMC 4.2.1 The reasons for Dell and EMC's merger and acquisition success “Bring the Cloud to the Ground” 4.2.1.1 Choose the ideal partner First, Dell has shifted to corporate technology, providing storage devices and servers, though PCs continue to account for the majority of its revenue Cloud computing, on the other hand, as well as the growing popularity of smartphones, pose significant challenges to the PC industry Mergers enable a company to sell more computing infrastructure as well as better converged hardware The merger of Dell and EMC has enabled them to improve product quality and outperform competitors Second, Dell also saw the future generation relying deeply on technology in the health, business, legal, and education sectors As a result, it acquired EMC, an innovative storage company, to meet the demand for enterprises to analyze data in real time and gain a competitive advantage Third, Dell Technologies' success is also reflected in rising profits and stock prices Product competitiveness has also improved since the merger with EMC (Dell Technologies, 2020) The rationale for this allegation is that the companies' 12 commodity and service prices have been declining According to Meddaugh (2017), mergers take two to three years to converge products and reduce prices This occurred some time after Dell Technologies was founded The merger was intended to increase their market share by a quarter It resulted in a near-monopoly in the development of storage devices Products are purchased from a single supplier As a result, the merger and acquisition succeeds because customers value the convenience of meeting multiple needs under one roof Further, fusion has led to the development of product brands with relative reliability and similar characteristics, increasing their competitive advantage Dell and EMC had technological similarities, which have facilitated research and development Last but not least, two CEOs Michael Dell and Joe Tucci share a common vision, the paramount reason for the success of that M&A deal “Our vision is a strategically aligned family of businesses that brings together customers’ entire infrastructure, from hardware to software to services, from the edge to the core to the cloud4.” 4.2.1.2 Unique and rational merger and acquisition method Dell and EMC merged and were acquired in a leveraged buyout (LBO) Michael Dell was tasked with coming up with $65 billion in cash to pay EMC shareholders after taking over the company Jamie Dimon, the billionaire and CEO of America's largest bank, JPMorgan Chase, assisted in the massive $67 billion takeover Dell was then forced to incur debts totaling up to $50 billion USD However, he quickly reaped the benefits when VMware's value skyrocketed to $ 50 billion, transforming the company into a "money-making tree" for Dell In 2018, VMware spent $14 billion in cash to buy back stock from shareholders Simultaneously, Dell publicly listed VMware as a subsidiary of Dell Technologies Investors were initially wary of VMware because its parent company, Dell Technologies, was in debt However, the stock price quickly soared, netting Michael Dell more than $ 20 billion He continued to withdraw $9 billion from VMware in order to repay a JPMorgan Chase LBO loan5 Prior to the LBO, Michael Dell held a 15.6 percent stake in Dell Technologies worth nearly $4 billion Dell now owns 52% of Dell Technologies and 42% of VMware, for a total of $ 40 billion, thanks to deft financial maneuvering 4.2.1.3 The merger and acquisition of equal Website Dell Technologies (2016), Dell and EMC Unveil “Dell Technologies” As Future Brand for Family of Businesses, https://investors.delltechnologies.com/news-releases/news-release-details/dell-andemc-unveil-dell-technologies-future-brand-family , accessed on 10/3/2023 Antonie Gara (2021), Deal Of The Century: How Michael Dell Turned His Declining PC Business Into A $40 Billion Windfall, Forbes, https://www.forbes.com/sites/antoinegara/2021/08/03/deal-of-thecentury-how-michael-dell-turned-his-declining-pc-business-into-40-billion-windfall/?sh=12182b9f5c2a, accessed on 10/3/2023 13 A pure merger is defined as a merger of equals A merger of equals occurs when two businesses of roughly equal size decide to merge into a single business entity Unlike mergers, where one company is identified as the acquiring entity and the other as the acquired business operation, this is not the case Therefore, the M&A has allowed Dell's go-to-market strength with small business and mid-market customers and EMC’s strength with large enterprises Mergers and the attendant Day One integration issues are among the most difficult challenges, from the pressure to achieve the expected synergies to the complexities of integrating systems, processes, people, brands and corporate cultures The merger of Dell and EMC in September 2016 to form Dell Technologies not only resulted in a company with $74 billion in annual revenue and 140,000 employees worldwide, but also a case study on how to meld two global high-tech organizations into a single entity7 4.2.1.4 Cultural alignment strategy post merger and acquisition In stages such as mergers and acquisitions (M&A), leadership transfers, operating models must be restructured, the way to retain and boost the morale of employees in a different cultural environment is so critical That means employees of both companies can still integrate well with the new working environment, not only maintaining but also increasing labor productivity, bringing positive profits for the corporation Dell Technologies has achieved success in human resource management following this merger and acquisition by always providing timely and transparent information to each employee Before the merger started, they established a Value Creation Integration Office (VCIO) to manage the organization's personnel and culture They spent more than 60 days forming groups, establishing conditions for employees to get to know one another, collaborate, and develop new work plans and goals for the group Teams meet and exchange daily updates for VCIO, so that new businesses can quickly grasp any internal changes and take appropriate action 4.2.2 Evaluate M&A between Dell and EMC by SWOT analysis Model SWOT analysis (or SWOT matrix) is a common strategic technique used to help identify strengths, weaknesses, opportunities, and threats in the marketplace as well as in the process of building a business planning for the project In this article, Group will analyze the M&A between Dell and EMC according to this model to see the effectiveness of it, as well as how Dell has, is and will have to run its business in the future Malcolm Tatum (2023), “What is a Merger of Equals?”, Smart Capital Mind, https://www.smartcapitalmind.com/what-is-a-merger-of-equals.htm , accessed on 10/3/2023 The Wall Street Journal (2017), “The Dell-EMC Deal: Anatomy of a “Merger of Equals”, https://deloitte.wsj.com/articles/the-dell-emc-deal-anatomy-of-a-merger-of-equals-1509974640, accessed on 10/3/2023 14 ● The formation of a merger increased their market share by a quarter It led to near-monopoly power in the development of storage devices The acquisition strengthened Dell's position in the global market The company has more than 150,000 employees worldwide S Strengths ● Dell and EMC had technological similarities, which have facilitated research and development Therefore, Dell Technologies is likely to achieve long-term synergies and cost savings through research and development As a result, Dell's products after the merger become more competitive in price than competitors ● The alliance between senior leadership from both sides shares a common vision of how both sides can work together effectively The vision of the leadership is a strong point of the company after the merger, so that Dell does not have internal conflicts but focuses on the common goal ● Dell Technologies has a good way of managing human resources after the merger They established a Value Creation Integration Office (VCIO) to manage the organization's personnel and culture They know the importance of harmony when working in a multicultural environment W Weaknesses ● During the early years of the merger DT has to spend nearly years to pay the debt of the acquisition of EMC So during this period, Dell invested in very little R&D As a result, Dell missed the opportunity to develop strong products for the smartphone and tablet market With the rapid development of technology Dell's lack of focus on R&D could leave it behind in the future ● After acquiring EMC and growing, Dell gained more market share and sales also increased However, Dell's greatest weakness is that buyers can't physically touch or see the product they want to purchase Dell does not have retail distribution stores It only has a certain number of stores by itself While after the merger, many people who want to buy are hindered by this Therefore, the company has not taken advantage of its full potential after the merger 15 ● Thanks to the ownership of the EMC company and modern storage products, Dell has more opportunities to compete than before ● Blends Dell’s go-to-market strength with small business and mid-market customers and EMC’s strength with large enterprises O Opportunities ● Unique corporate structure enables company the flexibility to innovate like a startup and invest in R&D for the long term while offering the trust, service and global scale of a large enterprise ● Dell can expand its network after acquiring EMC, thereby easily linking with research institutes, schools, colleges, etc can further promote the company's business ● Acquiring EMC makes it possible for Dell to provide both hardware and software If Dell can better calculate the production time by applying the Just-in-time model, it will be able to serve customers better with faster time ● This acquisition will not completely solve the challenge Dell is facing, which is the spread of cloud computing services as more and more companies choose to use the infrastructure of Amazon Web Service or Google Cloud Platform to save costs on the server T Threats ● The merged company has more than 80 billion USD in revenue, but it comes with tens of billions of dollars in debt High financial leverage makes the company's asset structure uncertain and easy to fall into bankruptcy In particular, the debt was completely enlarged in the context that the FED continuously raised interest rates at that time ● The company faces intense competition in all its business segments It competes in terms of price, quality, brand, technology, reputation, distribution and range of products, with Acer, Apple, HP, IBM, Lenovo and Toshiba ● After the merger, Dell became a multinational and larger than ever Therefore, Dell is easily affected by global economic policies, currency fluctuations 16 How Dell and EMC put this deal together is interesting, as a lot of experts thought a buyout deal of this size could never happen — and certainly not in technology The figures on the financial statements and the M&A theories not rate this as a good deal Because of reasons: (1) The sheer size as a leveraged buyout is unprecedented (2) The amount of debt used to finance the deal is staggering (3) And all three companies involved were already incredibly complex — not just in their organizational and business structures, but in their ownership and capital structures as well However, according to the above model, we can see that after the deal with EMC, Dell Technologies has achieved its own goals Despite many challenges and weaknesses, Dell has gradually earned its status as one of the leading technology companies Dell has made good use of its strengths and focused on promoting it In the future, Dell needs to face many problems in a harsh competitive environment and try to develop proprietary technology 4.2.3 The lessons learned from this M&A deal Sensitive to the changes of the times There are a lot of lessons to be learned from how Dell risked acquiring EMC and how Dell managed the post-merger company But the biggest and most consistent lesson during the merger with EMC is that Dell's leadership has a time-sensitive mindset and accepts the risk of change Dell generated approximately $57bn of revenue in 2013, about half of which was derived from computing devices and the other half from selling software, networks and servers As customers shifted their preferences towards mobile devices and cloud storage Dell’s revenues started to decline in every segment except for the server and networking unit, as can be seen in the chart below: Chart 4.2.3: Dell’s revenue split by division & evolution in 2013 17 Source: Bsmag.org EMC, together with its subsidiaries is a global leader in storage, security, virtualization and cloud computing solutions, with annual revenues of over $24bn and can therefore boost Dell’s servers and networks segment significantly Grasping this situation, Dell is facing the risk of bankruptcy but at the same time is facing extremely open opportunities "If you want to change, create, new things, you have to take risks," Michael Dell said The difference between trading, investing and gambling is that you can act with wisdom and vision to change the outcome In the context of a changing world, a big technology company like Dell still daring to accept change and taking risks to transform is a great lesson 18