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Dell M&A financing set to close in on a $67 billion deal
Not too long ago the prediction was made here that we'll be on our way to witnessing nine figure deals in closings as the desire to grow to megalitihic proportions spreads through commerce. At the time we cited some eight figure deals halfway up the scale.
Well, we've move another notch up. Dell is making gestures toward ECM, Inc. a figure has been worked out, and Dell claims they are "working on schedule" toward a consummation. The closing depends on approval by the ECB to O&G's understanding, similar to approval by US authorities in charge of anti-monoplist acquisitions if that is still in effect.
Why this should be of interest to us at Duff's is a matter of watching the value of the dollar fade and inflation gnaw away at value. It may be slow in surfacing to some, but the truth is that when something like this occurs in the business world, commerce is not leading the way into a new or yet to be born situation. . . It is here, now! The executives have no desire to be on the leading edge of paying too much for an acquisition; they'd prefer to delay and will hem and haw their way through a deal until they'll end up underpaying as inflation shoots past them in a flash. . . So, there, in the space of a sentence or two, are two options for describing the current condition.
True accounting will surface one way or another and this is the only way we'll know where we stand in relation to other currencies. Normally, inflation advances at a rate difficult to track, but we have been beset by the reverse inflationary condition of wages falling away from prices rather than prices running away from wages. Beset with this reverse situation for the past forty years our inability to recognize what is transpiring can be understood.
The public generally does not recognize just what is transpiring under the normal rising prices conditions. They receive their wages, their wages are paid in good, stable, American currency, yet the money "doesn't go as far as it did." In our case we'd say, "It's still an American dollar, is it not?" This self-deception was referred to art one time as the "money illusion". The term is hardly used anymore. But, rest assured it will come back into vogue.
When a leader like the Dell/EMC, Inc. suddenly springs out at us, we might give a little whistle, roll our eyes and mutter, "Boy, if that isn't one hell of a deal." Truth is, it's not a hell of a deal, but it is a hell of lot of money. And, the total value of the 2 company's has not risen, but the value of the dollar has fallen. Just as it took 30 some pages of solid reasoning for Ricardo to get the idea across to Parliament that the value of gold was not increasing but the purchasing power of the pound was decreasing, it will take a good deal of time before the impression will no longer be a surprise, though the general public still may not understand the difference. All they know is they can no longer afford to purchase things that were once within their reach.
In a few months, Dell's leap out in front will no longer be surprising. Others will jump into the fray at a higher level, expectations will be that the climb will persist. Prices will increase as that anticipation is fed, the valuation of the dollar will fall off further. Generally the "money lllusion" will mask the progressively dwindling purchasing power until a once common purchase of an item that did not command such a large percentage of the weekly income makes its new cost felt. It is then that the recognition shocks us into the new reality. Just so suddenly we will be seeing mergers and acquisitions that will stagger imaginations. No doubt GDPs will take an enourmous bounce and everyone will declare we're on the way to another Boom when in fact we'll be well on our way to a Bust.
It is then that income shrinks while prices are still adjusting upward, exacerbating the real condition and unveiling the deception in the "money illusion".
Now, if you can think back onto how we arrived at this last milepost, it may be true that the $67 Billion price tag on the Dell/EMC.Inc merger is the first true signal we are in the Bust phase of a collapse! Is this a play on words and the imagination?