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What a crazy turn of events. After all this M&A activity, Avago, a virtually unknown company, might end up owning Broadcom, Qualcomm, NXP and Freescale. How is
by airesQ 9y ago
What a crazy turn of events. After all this M&A activity, Avago, a virtually unknown company, might end up owning Broadcom, Qualcomm, NXP and Freescale.
How is this even possible? Who is financing these guys?
- adventured 9y agoHow is Avago virtually unknown? They derive from HP and Agilent Technologies, along with LSI. Pieced together originally by KKR & Silver Lake. Realistically it's a half century old entity. They then moved the corporation official seat to Singapore for various strategic reasons.
- airesQ 9y agoCalling Avago "virtually unknown" might have been too dismissive from my part. But lets consider 2013. Avago had a revenue of $2.5bn, respectable, but that's not much when compared with Qualcomm's $24.9bn, less than Broadcom's $8.3bn, NXP's $4.8bn, and Freescale's $4.1bn. In fact it seems that at least when it came to revenues, Avago was the smallest company on that list.
- qeternity 9y agoThat's how leveraged buyouts work.
- skinnymuch 9y agoPretty cool to see those revenue numbers. I assumed Avago would have been bigger revenue wise than NXP and Freescale (even with assuming you're using 2016 not 2013 revenue for them)
- Cthulhu_ 9y agoCan't charge taxes if it doesn't have revenue I guess.
- AndrewKemendo 9y agoHow is Avago virtually unknown? Unsure who you think should or would know Avago, but I am fairly certain they are far from a household name like HP is.
- mynameisvlad 9y agoI mean, if we go "household name" then I highly doubt NXP, Freescale, Broadcom or Qualcomm would make that list. People don't usually research who makes the chips in their doohickeys and gizmos.
- AndrewKemendo 9y agoYea agreed - which is why it seems silly to even bring up.
- skinnymuch 9y agoQualcomm has had commercials. Sometimes in pricey spots. They also have or had one or two stadium naming rights. So at least they'd be known by name (vaguely) by a decent percentage of Americans. Though would they know what Qualcomm does at all like even just "something with mobile devices"? No clue. Not really a retort. Just Qualcomm is at least known perhaps more than all the other companies combined. As little as that's worth.
- ajcodez 9y agoFor those unaware, KKR is the leveraged buyout king made famous in "Barbarians at the Gate".
- deleted 9y ago[deleted]
- xyzzy4 9y agoIt's possible using loans. If you get a big enough loan you can buy anything. And if profits hold steady, you can pay off the loans and everything works out great. The profits just have to be higher than the interest rates.
- simonh 9y agoAt least they are a tech company, not something like a water utility[1]. [1]https://en.wikipedia.org/wiki/Vivendi#Origins https://en.wikipedia.org/wiki/Vivendi#Origins
- sheetjs 9y agoSimilar story behind JPMorgan Chase: https://www.jpmorganchase.com/corporate/About-JPMC/document/shorthistory.pdf https://www.jpmorganchase.com/corporate/About-JPMC/document/... The Bank of The Manhattan Co. had an unusual beginning. Burr led a group of New Yorkers, including Hamilton, in obtaining a state charter for a company to supply fresh water to the residents of Lower Manhattan. At Burr’s initiative, the charter included a provision allowing the company to employ its excess capital in any activity “not inconsistent with the Constitution and laws of the United States.” Burr then used that provision to start a bank.
- simonh 9y agoThat seems like a deliberate end-run round the company registration system from the get-go, rather than an existing operating company using it's capital to diversify.
- thisisit 9y agoNot all transactions need finance from someone. LBO is a good example. Small company A can acquire a much bigger company B by pledging assets of B to take a loan to acquire B. This has been used to take a lot of companies private like Dell and even Avago before they were re-listed. The other example is cash and share. Small Company A can offer to acquire bigger company B by offer x amount in cash along with y amount of stocks in the joint company. In this case, company A needs to only serve up x amount of cash. This was the case when Avago acquired Broadcom - $17 billion cash and $20 billion in shares for total of $37 billion. Avago needed to pony up only $17 billion in cash, rest was taken care by conversion ratios: https://finance.yahoo.com/news/basics-may-broadcom-avago-merger-182642342.html https://finance.yahoo.com/news/basics-may-broadcom-avago-mer... The details of this offer are still not clear. Currently it is only an offer of cash and stock at $70 per share for Qualcomm. Currently, Broadcom has ~5 billion in cash and a huge amount of debt. There has been a lot of interest in the company's debt: http://marketrealist.com/2017/02/how-much-broadcoms-debt-burden-has-increased/ http://marketrealist.com/2017/02/how-much-broadcoms-debt-bur... As the article says: > The combined business would instantly become the default provider of a set of components needed to build each of the more than a billion smartphones sold every year. This could give them monopoly on some of the transactions which they maybe aiming for. It remains to be seen if they will succeed.