Dell is buying EMC Corp. The deal, valued at $67 billion, is double the record $33.4 billion Compaq-HP deal in 2001.
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NEW YORK — Dell’s record-breaking $67 billion deal to buy EMC is part of a growing trend toward “mega-deals,” or mergers over $10 billion by large companies seeking to join forces with other large companies to dominate their respective fields.

Dell’s deal, announced Monday, marks the largest price tag for a technology merger in history — beating out Avago Technologies’ $36.5 billion offer to buy fellow chip-maker Broadcom, according to research firm Dealogic.

It also adds to what is expected to be a record-breaking year for M&A generally.

By pairing with EMC, Dell aims to grab a bigger piece of the corporate computing pie by merging its core server business with EMC’s complementary, but not overlapping, data storage business.

Similar thinking — that bigger is better, especially when there’s not too much overlap — has been behind a spate of large mergers this year, including  Royal Dutch Shell’s $70 billion bid for BG Group and Charter Communications’ $55 billion offer to buy Time Warner Cable.

Avago and Broadcom also exemplify that trend. Both companies make chips, but Broadcom focuses on chips for wireless devices, whereas Avago focuses more on wired and industrial chips.

Overall, M&A is expected to total $3.83 trillion by the end of the year, up 4.5% from the previous record of of $3.66 trillion reached in 2007, according to research firm Mergermarket. Deals of more than $10 billion, or “mega-deals,” have accounted for a whopping 38% of activity this year, up from just 25% in 2014, according to Mergermarket.

Dell’s $67 billion offer to buy EMC only accelerates the trend.

But mega-deals can also be risky. In fact, there has been some movement in the opposite direction, especially in tech, with companies seeking to whittle down in order to better compete, including Dell competitor Hewlett-Packard.

HP is currently working on a plan to split into separate consumer and corporate computing divisions after going through it’s own mega-deal in 2001 and finding that bigger was not, in fact, better. HP bought Compaq in 2001 for what was then a record $25 billion tech acquisition in an effort to scale its resources and better compete with Dell.

“This is a real opportunity for HP,” the company said in a statement. “Two of our largest competitors are attempting a highly distracting, multiyear merger, just as we are launching two new, focused companies.”

A desire to be more nimble also led eBay to spin off payments arm PayPal earlier this year.

Despite the risks, analysts are responding well to Dell’s desire to be bulk up. The acquisition of EMC “improves the company’s profitability profile as a result of better product mix, and also enables the opportunities for revenue and cost synergies,” said Standard & Poor’s credit analyst David Tsui.

Dell founder Michael Dell is no stranger to paying record amounts for companies he wants. He and private equity group Silver Lake Partners paid $25 billion to take Dell private in 2013, upping their bid from an initial $21 billion. That deal marked the largest leveraged buyout of 2013, as well as the largest since the 2008 financial crisis made taking over companies with borrowed funds more difficult.

Follow USA TODAY reporter Kaja Whitehouse on Twitter: @kajawhitehouse


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