Analysis of the Purchase Price Allocation in the analog and mixed signal semiconductor market.

Abstract

When buying a company, the acquirer analyses and estimates each asset and liability of the target company in order to fix a reasonable purchase price and, later on, to integrate the acquired assets and assumed liabilities into the consolidated balance sheet. Furthermore, the breakdown of the purchase price, called the purchase price allocation, has an important future influence on the financial values of the combined entity and is specific to each market. The aim of this dissertation is to analyse the purchase price allocation in the analog and mixed signal semiconductor market based on a database of more than fifty European and American acquisitions by the main market players between 2010 and 2019. Due to the more subjective aspect of the intangible assets (technology, customers, trade names,...) and of the goodwill, i.e. the difference between the agreed purchase price and the fair value of the target company, a focus has been set on their value, their amortisation period, their justification and dependencies. First, the main trends of each interesting element of the purchase price allocation have been observed. The goal is to understand what an acquisition and its purchase price allocation in this technical market are typically like. Table 1 represents an acquisition sheet of a fictive target and shows the average values and the most frequent justifications of each individual element. It has also been shown that some values as for example the allocation to technology based intangible assets depend on the acquisition size whereas other values such as assets related to the trade names or the trademark do not. The activity of the target is also a source of dependence for the allocation of intangible assets as well as the goodwill estimation. However the justification of goodwill does not justify different goodwill values. Finally this analysis allowed us to understand the acquisition strategy of some acquirers, some are customer driven while others prefer targets with promising technologies. It is hoped this study will help acquirers as well as financial analysts understand the purchase price allocation in this specific market.