Silver Lake-backed Dell is reportedly in talks to acquire EMC (NYSE: EMC) in a deal that would come in as the largest tech takeover ever. The potential transaction comes as a bit of a surprise, as Dell, which went private in a nearly $25 billion LBO just two years ago, is much smaller than EMC, which boasts a market cap of around $50 billion. Shares of the target company jumped about 4.7% as a result of the news.
Founded 36 years ago, EMC centers its core business on data storage, yet the bulk of its value is derived from its 80% stake in VMware (NYSE: VMW), a virtualization software company that currently has a market cap of $34.7 billion. One issue that could derail a deal is simply financing. Dell holds around $12 billion of debt on its balance sheet, much of which was accumulated during its take-private deal in 2013. Thus, the ability to stack on additional debt to fund a transaction may be a difficult task, especially given the size of EMC.