Acquisitions might not be good for everyone

Our understanding is that Farnell had been in talks with Avnet for several months before the Datwyler announcement which looked like a done deal and was reported as such across the media. It seemed a good fit since Datwyler’s main focus is not electronic components and the company has a tiny presence in the UK. It would have used Farnell to gain entry to an important market with a major design focus. Avnet has a significant presence in the UK so it will be interesting to see where Farnell fits in.

Like Farnell, the big winners in the ARM deal are shareholders and key executives who will make lots of money from the SoftBank offer. There’s no real issue with this, or with the fact that advisers to both companies will pocket millions in fees. It’s now the way of the world. It appears that SoftBank has had to reduce its debt to acquire ARM which is never a positive sign. There is no doubt that technologically, ARM is a good buy. However, many feel that buyers have been reluctant to come forward until now for two reasons; an independent ARM was deemed good for our industry, and the pretty average profit levels bear no resemblance to the size of the company’s market capitalisation.

SoftBank says it has acquired ARM because of its potential involvement in the IoT. It’s a lot of money to pay for potential. ARM’s technology dominates the mobile space which is generally seen as a steady sector but not an explosive one like other processor hungry parts of the industry like IoT or data centres.

Whatever the reasoning behind the move, let’s hope SoftBank’s commitment to grow the business in the UK is a genuine one and not a ploy to keep everyone happy during the buying process and for the short term. It would not be the first time that promises made during the negotiations are forgotten once the signature is on the paper.