The demand for semiconductors and the rate of technological advancement in chips have never been greater. Leaders of these companies recognize that to stay competitive with new resources and capabilities, they must find innovative ways to take advantage of those unique opportunities. Mergers and acquisitions have been a traditional method of growth, but increased regulatory scrutiny and fewer large semiconductor companies are creating a trend of smaller deals across the industry. This trend is making it critical for semiconductor companies to learn how to maximize their value from smaller transactions.
The global economy saw a shift in 2021. The global chip shortage, combined with an increased investment in domestic production, is a signal of potential opportunity for the semiconductor industry. From 2016 to 2021, average transaction value in the semiconductor sector was below the $1 billion mark, and few megadeals of the $10 billion or greater are in sight.
Average transaction value of mergers, acquisitions, spinoffs ($M)
Extracting value by deal rationale
Accenture Strategy analysis shows that the average acquisitive company completed four acquisitions from 2015 through to early 2021. By comparison, the 30 most acquisitive firms made 42 deals within the same period, outperforming less frequent acquirers when their weighted total shareholder return was analyzed.
- This increase of deals comes with maximized integration efficiency and deal profitability, which can come from adhering to proven and refined target screening criteria.
Implications for private equity firms and corporate deal teams
Looking into 2022, large semiconductor companies are eager to expand their capacity due to robust demand. As a result, valuations for small and medium-sized businesses are at an all time high. If deals continue to trend toward smaller plays, a potential resurgence in private equity can be expected.
With the market trending towards smaller, more frequent transactions, it is now more important than ever to assess targets in a disciplined manner and build strategic M&A muscle for your organizations.