There have been a number of mergers and acquisitions announced recently in the technology field. A combined company valued at $40 billion is expected when chip maker NXP Semiconductors NV buys smaller chip maker Freescale Semiconductor Ltd. Freescale’s value has been placed at $11.8 billion. The two companies plan to merge operations. The friendly acquisition deal was recently announced by the two companies.
The merger will make the combined company the industry leader in the auto and industrial semiconductor markets. Chips belonging to the company being acquired are currently in Amazon technology products. The acquiring company’s revenue is up 46 percent to $712 million 2014 and its portable device and computer business is experiencing growth, however, its larger automotive and chip identification business only grew by 12 to 13 percent; the latter portions of its business together account for approximately half of its revenue.
The merger is considered a good sign concerning the confidence among semiconductor companies which is required to pursue larger merger and acquisition transactions. While the transaction is the biggest merger and acquisition deal this year in the semiconductor sector, it is only the fourth deal in the semiconductor sector this year. Recently a $600 million deal was reached between a technology company and a wireless networking company; a $287 million deal was announced when another tech company reported it would purchase a communications company; and a $600 million deal was announced between two technology companies at the beginning of the year.
NXP will fund the acquisition with $1 billion of cash, $1 billion in new debt and approximately 115 million of its shares. NXP enjoyed revenues of $5.7 billion in 2014 and Freescale enjoyed sales of $4.6 billion in 2014. While mergers and acquisitions may vary in size, the process of acquiring a new business is fairly similar in most circumstances and requires similar steps to successfully execute the process from the due diligence phase, to financing to closing the transaction. For any New York company considering acquiring another company, it is important to have a careful understanding of the merger process.
Source: Reuters, “NXP to buy Freescale, create $40 billion company,” Nadia Damouni and Suzanne Barlyn, March 2, 2015