Semiconductors M&A Fever Cools Down

24 January, 2018

The shrinking targets and the regulatory reviews of planned mergers by government agencies in Europe, the U.S., and China have slowed the pace of large semiconductor acquisitions

Semiconductors Mergers

The historic flood of merger and acquisition agreements that swept through the semiconductor industry in 2015 and 2016 slowed significantly in 2017, says IC Insights in a recent research. According to IC Insights’ new 2018 McClean Report, the total value of M&A deals reached in the year was still more than twice the annual average of a decade ago.

In 2017, about two dozen acquisition agreements of a combined value of $27.7 billion were much less than the record-high $107.3 billion set in 2015 and the $99.8 billion total in 2016. Prior to the explosion of semiconductor acquisitions that erupted several years ago, M&A agreements in the chip industry had a total annual average value of about $12.6 billion between 2010 and 2015.

Two large acquisition agreements accounted for 87% of the M&A total in 2017, and without them, the year would have been subpar in terms of the typical annual value of announced transactions.  The falloff in the value of semiconductor acquisition agreements in 2017 suggests that the feverish pace of M&A deals is finally cooling off. M&A mania erupted in 2015 when many semiconductor companies began buying other chip businesses to offset slow growth rates in major end-use applications such as smartphones, PCs, and tablets.

New Markets fueled M&A Fever

They also wanted to expand their reach into huge new market opportunities, like the Internet of Things (IoT), wearable systems, and highly “intelligent” embedded electronics, including automated driver-assist capabilities and fully autonomous vehicles in the future. With the number of acquisition targets shrinking, industry consolidation through M&A transactions decelerated in 2017.  Regulatory reviews of planned mergers by government agencies in Europe, the U.S., and China have also slowed the pace of large semiconductor acquisitions.

One of the big differences between semiconductor M&A in 2017 and the two prior years was that far fewer megadeals were announced.  In 2017, only two acquisition agreements exceeded $1 billion in value (the $18 billion deal for Toshiba’s memory business and Marvell’s planned $6 billion purchase of Cavium). Ten semiconductor acquisition agreements in 2015 exceeded $1 billion and seven in 2016 were valued over $1 billion.

The two large acquisition agreements in 2017 pushed the average value of semiconductor M&A pacts to $1.3 billion. Without those megadeals, the average would have been just $185 million last year.  The average value of 22 semiconductor acquisition agreements struck in 2015 was $4.9 billion.  In 2016, the average for 29 M&A agreements was $3.4 billion, based on data compiled by IC Insights.

More information: IC Insights

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Posted in: Deals and Investments , News , Semiconductors