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Last year there were around $120 billion worth of M&A deals done. This year, apart from a few failed Chinese bids and a NXP shedding a division or two, there hasn’t been much. “It’s not the same gold rush,” says Reinhard Ploss.
Why is this? The industry is stagnant this year as it was last year. The world economy ticks over. Nothing much has changed.
Except the fashion. M&A, like other industrial trends, is a fashion thing. M&A was in fashion in 2015. It’s not in 2016.
You’d think it would be a more scientific, more economics-based activity, but it isn’t.
Most M&A activity starts with a phone call to a CEO from a bank or investment fund.
“It’s Wily Oik here from Saxofcash, our numbers say that if you buy Sexi Semi now then, within 18 months, you’ll have a company with double the revenues, two thirds of the current combined opex and a 60% gross margin commanding a capex of $10 billion.”
CEO of a $10 billion company – that’ll impress the wife, thinks the CEO.
If the CEO wavers, Wily plays the trump card: “Super Semi just bought Super Integration and it’s rumoured that Fab Tech is about to buy Super Scaler. It’s an acquire or be acquired jungle out there.”
Telling the wife I’ve been acquired is not so great, thinks the CEO.
Wily doesn’t let go. He latches on to the CEO with silkier and sexier blandishments. The CEO is going to do pretty well for himself out of the deal, suggests Wily.
The deal gets done and the calls from Wily dry up.
After a couple of weeks the CEO thinks: ‘Remind me why I did that.’
Thanks AnotherDave that’s very flattering. I sort of keep thinking about doing it but I succumb to lethargy and the chip business is still too intriguing to stop following it
Right, Martijn, with regulatory hurdles it can take a year, but the actual announcement of the first bid can happen pretty quickly after the CEO decides to do it, so I think most of the decisions to do M&A in 2015 were made in 2015.
Time to dust off Ed’s diaries again, by the look of it …
With the above, who needs Ed? Dave should take up writing (as opposed to reporting…). Flesh out the paragraphs above and you’ve got at least a hundred or so pages.
sounds plausible but what is the lead time for a typical merger/acquisition? Seems pretty complicated most of the time, so was the wave of last year triggered by something before that?