In re Appraisal of Dell Inc.

Court of Chancery of the State of Delaware · 2016 · Corporations

Updated August 22, 2026

CorporationsAppraisalFair ValueMergers and AcquisitionsManagement BuyoutsDGCL 262deal pricemanagement buyout

Facts

Dell’s founder and CEO, Michael Dell, pursued a management buyout with Silver Lake after believing the market undervalued Dell’s long-term transformation from a PC-focused company into an enterprise solutions business. The special committee ran a pre-signing process largely limited to financial sponsors, received bids shaped by leveraged-buyout pricing constraints, and agreed to an initial merger price of $13.65 per share, later increased to a package valued at $13.96 and a final merger consideration of $13.75 per share. The committee did not determine a pre-merger going-concern value, and the market evidence showed skepticism focused on Dell’s short-term performance despite internal and advisor analyses indicating values well above market price. In the appraisal action, Dell argued that the final merger price was the best evidence of fair value, while the petitioners relied on a discounted cash flow valuation.

Issue

In a Delaware appraisal action arising from a management buyout, should the court treat the final merger consideration as the best evidence of fair value, or should it determine fair value independently using a discounted cash flow analysis? More specifically, did Dell prove that the sale process and deal price reliably established Dell’s fair value as a going concern at closing?

Rule

Under DGCL § 262, the court must determine fair value as of the merger’s effective time, exclusive of value arising from the merger itself, and must consider all relevant factors. Deal price is a relevant market-based factor but is not presumed or required to equal fair value; its persuasiveness depends on whether the transaction process reliably reflects going-concern value rather than merely the price a particular buyer or type of buyer was willing or able to pay. In an appraisal, the court evaluates the outcome achieved, not whether directors’ conduct satisfied fiduciary-duty standards, and may use its own DCF analysis when the deal price is not sufficiently reliable.

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A publicly traded software distributor based in Denver agrees to be acquired in a management-led buyout. In the Delaware appraisal action that follows, the company argues the merger price must control because the special committee negotiated hard, while dissenting stockholders present a discounted cash flow model built from reliable management projections.

How should the court approach valuation?

Explanation. Under DGCL § 262 as described by the majority opinion, the court must independently determine fair value as of closing, exclusive of merger-generated value, and consider all relevant factors. Deal price is relevant but not presumptively or conclusively equal to fair value. If the respondent does not show the transaction price reliably reflects going-concern value, the court may rely on its own DCF analysis. (Derived from In re Appraisal of Dell Inc. (n.d.).)