Why do chip manufacturers buy software companies?

Electronic enthusiasts: The owners of embedded software companies have carefully considered the issue of acquisitions by their semiconductor partners. To better understand the current market dynamics, we have reviewed acquisitions in the semiconductor industry over the past two years, and we have raised four key issues.

· Which chip companies use M&a to acquire software IP

· What type of company did they buy?

· What price they bought

· What kind of acquisitions do we want to see in the future?

Chip makers usually buy a software company for a variety of reasons. Typically, their acquisition targets provide their software development tools, middleware, or media decoding that can be bundled into their proprietary processor software development Kit. Acquisitions often enable a slow-growing semiconductor company to rapidly enhance its competitiveness in a new market with the technology acquired by acquisitions. For economic gain, some large and highly profitable software companies are also the targets of their acquisitions. Especially those acquisitions that add to the revenue complement. Sometimes those out companies will be merged as part of the buyer's production line. It was from this point that the US letter acquired Trinity Convergence in 2010. And Ti in 1999 acquired Telogy NX is the same purpose. Large acquisitions should in essence look more strategically. The seller will also continue to run the company as an independent department. Notable examples include Intel's 8 billion acquisition of McAfee in 2010 and the acquisition of Wind River in 2009 with 900 million dollars. Also in 2009, Cavium NX bought MontaVista with 54 million dollars. We are also likely to acquire some software companies because of the corresponding patent. One notable example is Intel's acquisition of RealNetworks in $120 million this year to obtain its patent and its corresponding audio decoding. The following is a deep analysis of the activities involved.

1. Which chip companies buy software companies?

It's obvious that most chip companies are greedy. Over the past five years, Intel has acquired 48 companies. Bo Tong acquired 16. According to Capital IQ, 38 mergers and acquisitions have taken place in the past two years. The most active software company buyers are Intel (with 8 deals), ARM, Imagination Technologies and Authen Tec (these are two deals per home).

2. What price do they have?

Before the extreme prices were removed. We have a target of the transaction price that has been completed over the past two years.

(1) The average transaction size is 49 million dollars

(2) The company's average value/Tax multiple: 5.2 times times

(3) Company average value/Tax multiple: 20 times times