Dell insiders concerned EMC merger could result in $9B tax bill, which might derail the deal
Arik Hesseldahl / Re/code :
Context & Ripple Effects
Two months after Dell entered takeover talks and weeks after Dell put $27.25 a share plus VMware tracking stock on the table, the deal's own architecture has become its biggest risk: insiders warn the structure could trigger a roughly $9 billion tax bill large enough to derail the transaction entirely.
The timing matters because EMC had already floated a buyout by its own subsidiary VMware as an alternative path, and shareholders on both sides are actively pressing for revised terms — giving Dell's tax problem real negotiating leverage for anyone who wants to renegotiate.
First-order effects
- Dell and EMC's deal teams now have to restructure the cash-plus-tracking-stock offer or price the potential $9B tax liability into the $50B+ package before signing.
Second-order effects
- EMC and VMware shareholders gain fresh leverage to demand concessions — a dynamic that surfaces two weeks later when they push for a VMware stock buyback and other changes to the buyout terms.
Third-order effects
- If tax exposure can bend terms on a deal of this size, acquirers of companies holding valuable subsidiaries like VMware will increasingly structure offers around those assets rather than absorbing them outright.
The trend: Tech's wave of debt-funded infrastructure megadeals is colliding with deal-structure tax costs, making subsidiary assets like VMware the pivot point of negotiations.