M&A agreements reach $55.3 billion in 2016

Article By : Vivek Nanda

2016 is a sequel to the M&A mania of 2015, ringing $55.3 billion in M&A agreement value in 3 quarters.

IC Insights recently released its September Update to the 2016 McClean Report. This Update included Part 2 of an extensive analysis of the IC foundry industry and a look at the current state of the merger and acquisition surge in the semiconductor industry. An excerpt from the M&A portion of this Update is shown below.

In a September update to its McClean Report, IC Insights has noted that the surge in semiconductor merger and acquisition agreements last year appears to have eased. But, the researcher continues to comment, 2016 is second in terms of recording M&A announcements in the chip industry, mainly due to 3 major deals struck in the third quarter this year.

Those 3 deals have a combined value of $51 billion, out of the total of $55.3 billion worth of M&A announcements this year. Compare this with an all-time high of $103.8 billion reached in all of 2015.

Through the first three quarters of 2015, semiconductor acquisition pacts had a combined value of about $79.1 billion, which is 43% higher than the total of the purchasing agreements reached in the same period of 2016, based on M&A data compiled by IC Insights.

According to IC Insights, 2016 has become a sequel to the M&A mania that started 2015, when semiconductor acquisitions accelerated because a growing number of suppliers turned to purchase agreements to offset slower growth in major existing end-use equipment applications, such as smartphones, PCs and tablets, and to broaden their businesses to serve huge new market potentials, including IoT, wearable electronics and strong segments in embedded electronics, like highly-automated automotive systems.

The firm said China's goal of boosting its domestic IC industry is also driving M&A. In the first half of 2016, it appeared the enormous wave of semiconductor acquisitions in 2015 had subsided substantially, with the value of transactions announced between January and June being just $4.3 billion compared to $72.6 billion in the same six-month period in 1H15. However, 3 large acquisition agreements announced in 3Q16, including SoftBank's purchase of ARM, Analog Devices' intended purchase of Linear Technology and Renesas' potential acquisition of Intersil, have ensured that 2016 will be second only to 2015.

[IC Insights Mergers Acquisitions Chart 201609]
Figure 1: Value of semiconductor M&A agreements. Source: IC Insights.

The market researcher points out a major difference between M&A activity this year and the last: many of the nearly 20 deals struck in 2016 are for parts of businesses, divisions, product lines, technologies or certain assets of companies. This year has seen a surge in the agreements in which semiconductor companies are divesting or filling out product lines and technologies for newly honed strategies in the second half of this decade.

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