Renesas to buy Altium

[Sal Ammoniac]

Renesas announced today that they're acquiring Altium for $5.9B.

https://www.reuters.com/technology/japanese-chipmaker-renesas-buy-australian-software-firm-altium-59-bln-2024-02-14/

[SiliconWizard]

Damn.

[ataradov]

Well, they will need to make those $5.9B back, so there is probably no reason to expect their marketing to change.

[delfinom]

It's a strange mash up really. Renesas will probably try to use it to shovel some of their parts, but on the other hand they are so hostile to deal with if you aren't an automotive customer or buying millions of parts per day that I don't see why they bothered.

[SiliconWizard]

Given the very large user base of professionals for AD, if Renesas makes great and dependable libraries for all of their parts (which they probably will), this has a good chance of getting many more customers.

But yeah, nothing of that kind is ever guaranteed, and this is a fricking large amount of money. Completely crazy. Such an investment would be already massive for getting, say, their own foundries, but for just a software? We'll see. Not really my problem I must admit.

I just don't like this seemingly neverending concentration of power. I think there should be economic rules to force a company to split up into smaller ones if it reaches a certain valuation. It would be a simple and effective way of fighting this concentration. Of course that may not be everyone's opinion, and some may argue that concentrating companies makes the whole more efficient (if that was the only thing to consider here), which I actually highly doubt anyway.

[ataradov]

There is one huge thing it will give them. Assuming cloud spyware is mandatory, they will instantly know what competitor products are being used in what type of designs. I'm not sure this is enough to justify the purchase, but it is not nothing.

[DrGeoff]

The offer is $68.5 per share, which is a huge premium over the $40/share approx that it was trading at.
Maybe they are eyeing the Altium revenue, which is quite good overall.

[SiliconWizard]

There is one huge thing it will give them. Assuming cloud spyware is mandatory, they will instantly know what competitor products are being used in what type of designs. I'm not sure this is enough to justify the purchase, but it is not nothing.

That's a pretty good, and concerning at the same time, additional point.

[ataradov]

And then you see "AI" saying "I see you are placing competitor's product X, have you considered using Renesas product Y? Click here in the next 4 hours to secure a discounted price of $$".

[Shonky]

Well, they will need to make those $5.9B back, so there is probably no reason to expect their marketing to change.

Not sure if serious, but that's not how business acquisitions work usually.

[brucehoult]

Well, they will need to make those $5.9B back, so there is probably no reason to expect their marketing to change.

Not sure if serious, but that's not how business acquisitions work usually.

How do they work?

"work" or "work out"?

If the directors of Renesas don't genuinely expect to make an additional $5.9B in profits (and more), NPV, from buying Altium then they should not be doing it -- and their shareholders should be suing them.

Of course M&A very often don't result in the promised synergies, but the consultants and lawyers already got paid.

[notsob]

How many Altium shares do you still have Dave

[.RC.]

How many Altium shares do you still have Dave

They might want the Altium building back that he currently uses for a lab.

[Ice-Tea]

Well, there goes the neighbourhood

Given the very large user base of professionals for AD, if Renesas makes great and dependable libraries for all of their parts (which they probably will), this has a good chance of getting many more customers.

But they don't have to buy Altium for that. Prime example: Wuerth. They have great Altium libraries, I'm sure it helps them land a customer or two and they didn't have to buy the company for that.

If the directors of Renesas don't genuinely expect to make an additional $5.9B in profits (and more), NPV, from buying Altium then they should not be doing it -- and their shareholders should be suing them.

They don't have to earn $6B in profits, that's not how it works. If you have 100k cash on your balance and then buy a 100k$ building with that money nothing really changes for you or your shareholders.

It's the cost of the capital that needs to be compensated, not the capital itself.

[Shonky]

Well, they will need to make those $5.9B back, so there is probably no reason to expect their marketing to change.

Not sure if serious, but that's not how business acquisitions work usually.

How do they work?

"work" or "work out"?

If the directors of Renesas don't genuinely expect to make an additional $5.9B in profits (and more), NPV, from buying Altium then they should not be doing it -- and their shareholders should be suing them.

Of course M&A very often don't result in the promised synergies, but the consultants and lawyers already got paid.

They are investing in the company. Yes the acquisition provides (well should provide) additional income from that business unit. But its value doesn't go to zero so that they need to get all of the purchase price back. If anything, a good acquisition grows in value on its own and so they shouldn't "need to make their money back".

Over which period does a business expect to earn their entire investment back. 1 year? 5 years? 10 years? Good P/E is say 10-20 i.e. 10-20 years and in that time they should be regaining the initial investment then.

[RoGeorge]

they will need to make those $5.9B back

Maybe such acquisitions are not meant for profit.  These look like strategic moves, driven by politics and power.  High tech industries are slowly captured under a single umbrella, one company at a time.  I wonder why.

[brucehoult]

Well, they will need to make those $5.9B back, so there is probably no reason to expect their marketing to change.

Not sure if serious, but that's not how business acquisitions work usually.

How do they work?

"work" or "work out"?

If the directors of Renesas don't genuinely expect to make an additional $5.9B in profits (and more), NPV, from buying Altium then they should not be doing it -- and their shareholders should be suing them.

Of course M&A very often don't result in the promised synergies, but the consultants and lawyers already got paid.

They are investing in the company. Yes the acquisition provides (well should provide) additional income from that business unit. But its value doesn't go to zero so that they need to get all of the purchase price back. If anything, a good acquisition grows in value on its own and so they shouldn't "need to make their money back".

Over which period does a business expect to earn their entire investment back. 1 year? 5 years? 10 years? Good P/E is say 10-20 i.e. 10-20 years and in that time they should be regaining the initial investment then.

Did you miss the "NPV"?

[Smokey]

Wow.  Just read about this.
All acquisitions create a certain amount of chaos.  Especially around continuing support for products that the acquiring company might not care about.  Renesas has been on an acquisition spree over the past few years, mostly of companies with a decent catalog of products.  I felt the pain of being on the wrong end of a product that renesas didn't care to support well.  It will be interesting to see what they do with Altium considering they make essentially one thing. 

Let's hope support actually increases.

[tszaboo]

Second thought: Japanese companies operate a bit differently, they buy anything slightly related to their business. I worked for an EMS long time ago. They were a concrete making company. That bought a construction company because constructions use concrete. Then they bought a shipmaker because concrete was transported by ships. Then they bought an electronics company because ship has electronics in them. Did we do ship electronics? No, we were assembling Panasonic car radios and JVC flatscreen televisions. It doesn't ahve to make sense for them.

First though: Oh hell no. There are so many nefarius things they can do now, I'm really afraid. How is it going to be, you want to place a Renesas component from the online parts library, and lawyers come to your office asking you to sign an NDA to see the footprint and the datasheet?

[Daixiwen]

Let's hope support actually increases.

Given the price they paid I'd say their priority will be to increase revenue and cut costs

[EEVblog]

The offer is $68.5 per share, which is a huge premium over the $40/share approx that it was trading at.
Maybe they are eyeing the Altium revenue, which is quite good overall.

Altium has zero debt, it's been a pure cash cow for 30 years.

That's one heck of a cash out for Aram. I believe original founder Nick Martin sold most or all of his shares after he was booted out.
I feel sorry for Nick, he's a nice guy, and a nerdy tech guy who just didn't know how to run a business for profit. Aram did and it payed off for him.

I was this close to buying shares at 10 cents 

[EEVblog]

Second thought: Japanese companies operate a bit differently, they buy anything slightly related to their business.

I wonder is this does anything for the big US government customers? Japan is a US ally, so I'm guessing no impact.
When Altium packed up and moved to China all the US government bodies said they would stop using the package, oops.

[iMo]

Second thought: Japanese companies operate a bit differently, they buy anything slightly related to their business.

I wonder is this does anything for the big US government customers? Japan is a US ally, so I'm guessing no impact.
When Altium packed up and moved to China all the US government bodies said they would stop using the package, oops.

Which US gov bodies use Altium?
Purchasing of "strategic" goods is subject to many anti- anti- anti- acts/laws in US, especially when the gov body is purchasing something..

[delfinom]

Second thought: Japanese companies operate a bit differently, they buy anything slightly related to their business.

I wonder is this does anything for the big US government customers? Japan is a US ally, so I'm guessing no impact.
When Altium packed up and moved to China all the US government bodies said they would stop using the package, oops.

Not really, US FedRAMP requirements basically exclusively mandate US citizenship for the operational end of cloud and software services, there is no exception for allies. But that's just for all the cloud junk which Altium is heavily pushing. These requirements are also infectious of contracts and contractors have to follow them too if they are working on govt contracts.

For plain software without the spyware and cloud the rules aren't as strict.

Though I work with US govt bodies, they don't do any kind of hardware design, it's long been outsourced to contractors who can use whatever.

[nctnico]

The offer is $68.5 per share, which is a huge premium over the $40/share approx that it was trading at.
Maybe they are eyeing the Altium revenue, which is quite good overall.

Altium has zero debt, it's been a pure cash cow for 30 years.

That's one heck of a cash out for Aram. I believe original founder Nick Martin sold most or all of his shares after he was booted out.
I feel sorry for Nick, he's a nice guy, and a nerdy tech guy who just didn't know how to run a business for profit. Aram did and it payed off for him.

I was this close to buying shares at 10 cents 

I should have mined 1000 Bitcoins... I should not have sold them when they where worth €10 each... I should not have sold them when they where worth €100 each... I should not have sold them when they where worth €1000 each... I should not have sold them when they where worth €10000 each... The list goes on...