Private Equity Hottentots
Watching the private equity companies trying to run semiconductor companies is like watching a Hottentot trying to get a screw out of a bit of wood.
He pulls, he pushes, he bashes it from side to side, he applies more and more levers, but still the screw doesn’t come out.
He’s not to know that it turns.
So with KKR and Blackstone who acquired NXP and Freescale respectively, back in 2006.
Here we are, six years later, and the companies’ sales haven’t risen in all that time, their profits haven’t risen (in Freescale’s case there haven’t been any profits) and the companies’ market cap is still miles away from the valuations put on them when KKR and Blackstone bought them.
Freescale’s market cap is about $2.4 billion compared to the $17.6 billion valuation at the time of the takeover; NXP’s market cap is about $5.8 billion compared to the $10 billion valuation put on it at the takeover.
After six years! And the semi market hasn’t stood still those six years.
So the private equity Hottentots sweat away with their levers (and how they leverage!) and they bash the screw from side to side, and they pull it from the top and push it from the bottom, and they scratch their heads but they still don’t get it.