Private equity has had its successes in the semiconductor arena, according to Rich Beyer, Chairman and CEO of Freescale Semiconductor, which was acquired in 2006 by a number of private equity companies led by Blackstone.
Asked if private equity had contributed anything to the semiconductor industry, Beyer replies: "Fairchild turned out to be a great success, private equity ownership allowed them to restructure themselves, and Intersil was successful under private equity ownership."
"The reason why everyone is concerned is because two large transactions (Freescale and NXP) took place just before the semiconductor downturn", adds Beyer, "if you look at Intel and TI, their valuations have gone down substantially since then. It's too early to say that the investments by the private equity firms have been inappropriate."
Asked if private equity had now lost interest in further investments in the semiconductor industry, Beyer responds: "I don't think private equity investment in these type of companies will come to an end. We're in the middle innings of the two big ones. The private equity people say this is a journey that will take several years - from three to five years - during which the semiconductor cycle will swing back."
Asked if there's any upside in being owned by a private equity company, Beyer replies: "The benefit is that you can do things that would be more painful if you report quarterly results. If you're totally private, no one knows what's going on. It's publicly traded. Freescale debt is publicly traded, and NXP debt is publicly traded and both companies have to report earnings. So while there's some relief from the pressure of day-to-day public markets, I don't see it as totally different from running a public company. I want to set a path of consistent financial results."
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