When the chips are down 

Contact: Scott Denne

After two years of record consolidation among semiconductor companies, M&A has deteriorated as fewer sizeable targets remain. The two most recent significant sales in the chip industry show that suitable buyers are just as lacking as the sellers in both deals ink uncertain transactions. In the largest chip transaction of the year, Toshiba has agreed to a $17.9bn sale of its flash memory business to an unwieldy syndicate – meanwhile, Imagination Technologies sold itself off in two separate deals (worth $800m) aimed at avoiding objections from US regulators.

Toshiba finds itself forced into the sale of its flash business to raise capital following the bankruptcy of its nuclear subsidiary – certainly not ideal conditions for a sale. Yet the winning bidder for the second-largest maker of flash memory, a syndicate led by Bain Capital, raised legal objections from Western Digital, a flash storage vendor that has a joint venture (JV) with Toshiba.

There are questions about how well the group could manage the asset, even if the buyer manages to get the transaction over the finish line – an uncertain prospect given the spat with Western Digital. The investor group (Bain, Apple, Dell, Toshiba, Seagate, SK Hynix and three others) called and abruptly cancelled a press conference on the deal. A squabble over media strategy doesn’t bode well for setting a coherent course for a business with $7bn a year in revenue.

Earlier this week, UK-based Imagination Technologies announced that it will sell most of its business to Canyon Bridge Capital Partners, a China-funded private equity firm whose proposed takeover of Lattice was recently shot down by the Trump administration. Imagination is selling its US-based MIPS business to Tallwood Venture Capital in hopes of avoiding such a fate.

If the Toshiba deal stands up to multiple legal challenges from Western Digital – the company claims Toshiba has limited rights to transfer ownership of a JV between the two companies – it will nearly double the size of semiconductor M&A this year to $44.2bn, a pace that’s less than half of last year’s, according to 451 Research’s M&A KnowledgeBase.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.