Mannerisms

“If you only ever read one book on M&A, read ‘Five Frogs On A Log’” says McGregor, “according to the book, the majority of M&A deals destroy shareholder value.”

“We buy one or two companies every quarter”, says McGregor, “we look for acquisitions with outstanding engineering teams with great understanding of product markets and which can fit in. They are often pre-revenue or in early stage revenue.”

What is the result of these acquisitions? “25 to 30 per cent of the acquisitions are neutral as to shareholder value; 25 to 30 per cent destroy value; 25 to 30 per cent add value,” says McGregor.

He points out that: “Start-up semiconductor companies struggle because they do not have enough money and they don’t have much IP. They have to scrabble for IP. And they cut these wacky deals with foundries”.

Examples of where Broadcom can add value to a start-up are: “We bought one company which had all this IP from dirt-ball IP suppliers and which was using one of our competitors for foundry. We said: ‘Next time you use the Broadcom tool flow, and Broadcom IP, and our foundry partner.”

Another example was an acquisition of a great engineering team which was focused on an unpromising market area. “We re-positioned them to address 802.11g wireless LAN and they’re the reason why we now have the leading market position in WLAN.”

If you must do M&A, keep the M&A group small, advises McGregor. "Our M&A group is one and a half guys".

The danger with a large group is that different factions will form within it. Then you''ll get the situation that: "One group will buy a company which the other group doesn't want."