Francisco Partners and TPG Capital’s $4 billion planned acquisition of Dell Technologies(NYSE: DELL) cloud unit Boomi announced yesterday tells a familiar story for the computer maker–leaner is better. Let’s take a look at a recent analysis of private equity acquisition of carve-outs to see whether that’s an outlook shared by other conglomerates.

Dell Technologies Inc. components inside a supercomputer at the San Diego Supercomputer Center at the University of California San Diego

The Boomi transaction comes weeks after Dell announced plans to spin off its 81 percent stake in VMware to current shareholders, and may have had its buyside roots in a previous deal. Carve-out specialist Francisco Partners would’ve been well acquainted with Dell since at least 2016, when it acquired Dell’s software group for $2.4 billion. That divestiture helped finance the company’s $67 billion acquisition of EMC.

On Francisco Partners’ side, the 2016 transaction was one of three that helped it clinch Mergers & Acquisitions’ Private Equity Firm of the Year Award. The financial sponsor knew two composite assets in Dell’s package of software assets from previous auctions, allowing it to move quickly and with more certainty than rivals that may have bid more, Francisco Partners CEO Dipanjan “DJ” Deb told this news service at the time. Hear Deb’s take on the current state of carve-outs at Wednesday’s virtual Best in M&A Speakers Series.

Boomi’s sale comes as corporate divestitures have accelerated, at least on the other side of the pond. Pandemic-battered companies had to focus on core operations last year, accelerating strategic reviews, according to Mayer Brown. Could similar factors drive domestic companies to part with non-core units? 

While the cast of characters from the recent upswing in UK carve-outs is similar, it is far from clear that a US version of the show is in the offing. US PE firms led the largest UK carve-out deals in 2020: KKR snagged assets from cosmetics maker Coty Inc. (NYSE: COTY) for $4.3 billion, I Squared Capital acquired GTT Communications for $2.2 billion, and Francisco Partners bought the international unit of automotive software maker CDK Global (NASDAQ: CDK) for $1.5 billion. Bidder interest looks robust. 

But US companies’ willingness to part with units is highly idiosyncratic. Dell’s imperative to retire debt, for instance, was spurred by financing the largest tech deal ever. And the pandemic driver of UK divestitures seems to have hit the US less acutely if share prices are a guide: the FTSE 100 is up 26 percent over March 2020 lows, while the S&P 500 is up 65 percent. Investors, if not executives, are betting that the worst is behind us. 

Even broader trends that might normally point to a wave of separations have yet to crest: conglomerates tend to seek divests during economic boom times when “core” businesses reach peak valuations and diversified revenue streams are no longer needed as a hedge against market exposure. Stock valuations are high nearly across the board, but most analysts think they could climb higher given the Fed’s commitment to low interest rates. 

There are plenty of tailwinds for a robust dealmaking season before the summer slump as discussed in previous columns, but it’s not clear that conglomerate divestitures will lead the way to the league tables.