Sometimes Acquisitions Work Out, and Sometimes They Don’t

October 19, 2021

Blog

Acquisitions in our space are pretty common. Sometimes they make a lot of sense, sometimes they make me scratch my head.

Those that make sense are when Company A is able to plug a hole in its portfolio by acquiring Company B. Those that make less sense are when Company A is looking for acquire the customers of Company B with less emphasis on the technology that’s coming along as part of the deal.

The classic example of one that does not work out is the processor vendor acquiring the operating-system company. I’m having a hard time coming up with an example of where this worked out in the long run.

Some examples where it does make sense (or will over time) are Cypress being bought by Infineon, Atmel being purchased by Microchip, and Linear Tech being acquired by Analog Devices. In each of these cases, the mother company took on technology that it did not already have and was able to exploit the additional product lines.

There’s one where the jury is still out, but I do have high hopes because it does fit my criteria for an acquisition that makes sense: Renesas’ purchase of Dialog Semiconductor.

I recently discussed this deal with Sailesh Chittipeddi, Renesas’ Executive Vice President and General Manager of the company IoT and Infrastructure Business Unit. He went through how the combined companies now have a diverse talent pool and well as more diverse revenues. But what it really comes down to is a more diverse product portfolio. Without that, it’s all just window dressing, and will not pan out over the long haul.

Combining the Dialog communications products with the Renesas processor products does result in a winning portfolio. I guess you can throw in the Intersil products (a Renesas purchase not too long ago) and you have more of an end-to-end product chain.

Check back in about two years and we can decide whether this was a smart acquisition or not.