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April 28, 2016
martinwolf Transaction Analysis
Cypress Semiconductor to Acquire Broadcom's Wireless IoT Business
 
Financial Information
  • Enterprise Value                                         $550 million
  • EV/Revenue                                               2.9x

Transaction Facts

  • Cypress Semiconductor Corp. (Nasdaq: CY) announced today that it is acquiring the wireless Internet of Things business of Broadcom Limited (Nasdaq: AVGO).
  • The acquisition includes Broadcom's WiFi, Bluetooth and Zigbee IoT product lines and intellectual property, as well as its WICED brand and developer ecosystem. The division generated approximately $189 million in LTM revenue and is growing approximately 17%.
  • The transaction is expected to close in the third quarter of 2016 and be accretive within a year of closing.

A Changing Industry Means Opportunity

  • Constant Consolidation: A broader slowdown in the overall semiconductor industry has led to significant consolidation in the last year as major industry players seek to preserve growth. Notable examples of this trend include Avago's acquisition of Broadcom Corp. in what was the largest technology deal ever at $37 billion, and Intel's acquisition of Altera for $16.7 billion.
  • Internet of Everything: Despite this consolidation, the Internet of Things market is a significant bright spot for the semiconductor industry. With more than 29.5 billion connected devices and a total market size of $1.7 trillion expected by 2020, there has been a gold rush of companies looking to harness this growth and supply the chips that facilitate this connectivity.
  • Good for the Goose and Gander: This transaction serves both sides. For Cypress, it provides access to an industry with strong growth potential. For Broadcom, it helps pay off some of the $37 billion Avago spent to acquire it and allows the company to refocus on its core: high volume customers.
  • A History of Inorganic Growth : Cypress started as a seller of static RAM but has grown its capabilities through M&A, most recently with its $4 billion acquisition of memory chip maker Spansion, Inc. The company has not yet been able to fully realize the anticipated gains from the transaction, and it is still working to complete the integration.
  • Up and Down: The market was initially up on the news, which included an announcement by CEO T.J. Rodgers that he was stepping down and quarterly earnings in line with Wall Street estimates. However, by the end of the trading day the stock had erased its gains and closed down one cent before rallying 1 percent after hours. Broadcom shares dropped more than 2 percent and lost an additional percent after hours.
For more information about this transaction,  click here to read the press release.

martinwolf was not the advisor in this transaction.

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About martinwolf    


With offices in the San Francisco Bay Area, martinwolf is a leading M&A Advisory focused on middle market companies in the IT Services, IT Supply Chain, IT-Enabled Business Process Outsourcing and Software as a Service (SaaS) space. Since 1997, our team has completed more than 140 transactions in nineteen countries and sold seven divisions of Fortune 500 companies. 

 

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