July 29, 2016

Major semiconductor merger indicates shift in tech M&A focus

Analog Devices recently acquired Linear Technology.

The semiconductor industry just got a little more interesting. Analog Devices, a multinational semiconductor organization, recently announced it would be acquiring Linear Technology Corporation, a designer, manufacturer and marketer of high-performance analog integrated circuits, in a deal valuing Linear at approximately $14.8 billion. The combined enterprise is valued at $30 billion.

What are the benefits of this deal?
The numerous strategic and financial benefits of this deal include aligning the newly combined organization as a global high-performance analog industry leader, merging together two complementary businesses and accelerating innovation and revenue growth in ideal marketplaces. This deal will also position the company as a leader across all top high-performance analog product categories, thus enabling it to produce dynamic products, service and consumer support.

Prior to news of this merger being announced, shares of Linear Technology skyrocketed 29 percent to their highest level in over 15 years, according to MarketWatch. In a company press release, Vincent Roche, president and chief executive officer of Analog Devices, explained that the combination of the two illustrious companies will create one of the strongest and more expansive technology franchises in the entire semiconductor industry.

"Our shared focus on engineering excellence and our highly complementary portfolios of industry-leading products will enable us to solve our customers' biggest and most complex challenges at the intersection of the physical and digital worlds," Roche said. "We are creating an unparalleled innovation and support partner for our industrial, automotive, and communications infrastructure customers, and I am very excited about what this acquisition means for our customers, our employees, and our industry."

Bob Swanson, executive chairman and co-founder of Linear Technology, agreed with Roche, stating that through merging their companies, they can reinforce their leadership across the worldwide market, draw in a new customer base and enhance their shareholder value. Swanson said that his organization is dedicated to ensuring a "smooth transition" in the coming months. 

Following regulatory approval, Roche will continue to serve as the president and CEO of the newly combined organization, while an integrated leadership team from both Linear and Analog will provide meaningful insight from both company perspectives. While Linear Technology will serve as the brand for Analog Devices' power management offerings, it will assume the Analog name. 

What is the shift in perspective for tech M&A activity?
One of the main reasons behind major M&A deals recently is the shift in focus about the way companies capture and store data, Business Insider reported. Whether this is in the telecommunications, e-commerce, software or computer data industry, new memory devices and services become all the rage.

Previously, data was stored on hard disk drives, benefiting companies that created these disks, like Seagate, Toshiba and Western Digital. However, as this type of technology becomes nonexistent and is replaced with revolutionary flash-memory chips, established organizations will look to buy companies with innovative, new technology, rather than invest in creating their own products.

This was the case when Western Digital bought SanDisk, or when Dell made tech M&A history with its multibillion dollar acquisition of the data storage company, EMC. Even cloud storage services, such as Amazon Web Services and Microsoft Azure, are moving toward solidifying their hold in the data storage market.

Overall, whether it is the Analog acquisition of Linear, or Seagate buying up a flash-chip memory card company, the tech industry is all a buzz right now with data storage on the mind. The coming months will most likely unveil numerous other multimillion and billion dollar deals in the race to capture, store and analyze data more quickly, securely and effectively.