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"Try not to become a man of success. Rather become a man of value."

-Albert Einstein

Lam Research Acquires KLA-Tencor

Financial Information
  • Enterprise Value:  $11.3 Billion
  • EV/LTM Revenue: 4.0x
  • EV/LTM EBITDA: 14.5x
Transaction Facts
  • Lam Research (Nasdaq:LRCX) announced Wednesday a definitive agreement to acquire KLA-Tencor (Nasdaq:KLAC) in a deal uniting two of the largest makers of semiconductor manufacturing equipment.
  • Lam builds machines involved in depositing or etching materials on silicon wafers, while KLA-Tencor specializes in machines that spot defects in chips. Both have been susceptible to a broader slowdown in the overall semiconductor industry, as chipmakers like Intel begin to acknowledge deviations from Moore’s law. Analysts have estimated that the market for chip-manufacturing equipment will decline 2% in 2015 to $48.8 billion.
  • KLA-Tencor shares lifted 18.8 percent today following news of the deal, while Lam closed up 1.1 percent.
We’ve Seen This Before
  • Big Deals for Small Chips: KLA-Tencor, itself the product of a 1997 merger of two suppliers, becomes the latest acquisition in a sector full of large deals in 2015. Thanks to a combination of low valuations and flagging organic growth, deals involving semiconductor companies have totaled more than $100 billion this year, compared with an average of $38.3 billion over the last five years.
  • Deals Throughout the Supply Chain: This year has seen major deals on every level of the semiconductor space. Beyond manufacturing equipment producers like Lam and KLA-Tencor, we’ve seen significant consolidation among chip manufacturers. Earlier this year Avago acquired Broadcom in what was then the biggest tech deal ever at $37 billion in cash and stock, followed shortly by Intel acquiring Alterra for $16.7 billion.
  • Big Results: Lam estimates that yearly revenue of the combined company would amount to $8.7 billion, while generating $250 million in annualized cost savings within 18-24 months. The transaction is predicted to win approval by regulators as both companies operate in distinct segments of the equipment market and both are based in America.
For more information about this transaction, click here to read the press release.
martinwolf was not the advisor in this transaction.
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