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July 18, 2016
martinwolf Transaction Analysis
SoftBank to Acquire ARM 
 
Financial Information
  • Enterprise Value                                        £23.5 billion
  • EV/LTM Revenue                                      23.1x
  • EV/LTM EBITDA                                        51.8x
Transaction Facts
  • Japanese multinational telecommunications conglomerate SoftBank (TYO: 9984) announced today that it was acquiring British semiconductor designer ARM Holdings (Nasdaq: ARMH) for £23.5 billion, or approximately $32 billion.
  • ARM, founded in 1990, designs microprocessors for devices such as Apple iPhones and Samsung smartphones while licensing blueprints to chip makers like Qualcomm. 
  • SoftBank, which began as a software distributor in 1981, became one of Japan's three largest telecom companies in the 2000s. The company recently sold approximately $10 billion of shares in Alibaba to pay down its debt, reducing its stake in the Chinese IT giant from 32 percent to 28 percent.
  • Following the deal, SoftBank announced its intentions to double the size of ARM's UK team, currently numbering approximately 1,600.

Size Matters

  • Big In Every Way: This deal is a big deal by many calculations, testifying to today's business climate and its conduciveness to M&A. It's SoftBank's largest investment ever, according to Dealogic, and it's the third-largest proposed merger this year after Bayer's offer for Monsanto and ChemChina's bid for Syngenta.
  • Chips Ahoy: ARM is a significant player in the chip space. Though it does not build chips itself, chips it designs are at the heart of not just phones but also routers and other networked devices (a space where it expects to grow its 15 percent market share to 45 percent by 2020) as well as in servers (a market historically dominated by Intel). The deal would be the second largest chip deal on record after Avago's $37 billion buy of Broadcom.
  • Buying in to Big Potential: SoftBank CEO Masayoshi Son emphasized that this deal represents a sizable investment in the Internet of Things, a space where he expects significant market interest (and subsequent demand) in coming years.
  • What Brexit?: This deal, the largest takeover of a British company by an Asian company, is being celebrated by the British government as a sign that there is still significant interest in foreign investment despite the uncertainties brought about by Brexit. While the weakening pound has made British companies on the whole more affordable, the increase in value of ARM's shares since the Brexit has outpaced the currency advantage and offset any "Brexit discount."
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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To learn more about martinwolf, contact Matthew Putzulu at [email protected].

 

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