Avago Is All Set To Buy Out Broadcom Corporation

Avago invests $37 billion to buy Broadcom.

There is a dire need of cheaper chips and innovative products that can assist in powering gadgets enabled with Internet of Things (IoT). This has helped in driving consolidation in the tech sector. A latest merger in the sector is of Avago and Broadcom, which is said to be a $37 billion.

This decision by Avago to buy Broadcom Corporation is said to be the largest merger in the history of chipmakers. This company, which was said to have a negligible impact on the fraternity, is now transforming itself into a key game player. There have been several similar deals in the semiconductor industry where NXP Semiconductors offered to buy Freescale for $11.8 billion. Avago also tried to buy Freescale at that point of time.

Likewise, Intel has also been in a negotiation phase with Altera, which is likely to happen for $14 billion. Recently, the biggest deal for Avago was with the LSI Corp., the renowned chipmaker, which the company had bought for $6.6 billion the previous year.

The company, along with Broadcom, previously announced about a possible merger in October in the fiscal year of 2014, but the deal failed since they could not agree on a single price reported by people familiar with the matter. Avago Technologies did not give up and approached Broadcom in April 2015 again by increasing the offer. This continued but both businesses did not agree.

Avago, which enjoys a ‘big name’ in the industrial and wireless market is now offering around $17 billion in cash to the shareholders of Broadcom Corp., where the stocks of Altera is valued at $20 billion. Broadcom Corporation has established a niche market for its connectivity chips that is now used by various smartphone companies. The prominent clients of the acquired company include Samsung Electronics and Apple Inc.

The company has made a in intelligent decision to buy Broadcom, since the merger can help it to explore new dimensions. The acquisition is a ‘big name’ that has a great market share along with a fancy portfolio. This provides an opportunity to Avago to cash moreover. These other potential benefits of this buyout will help the company in making their bargaining position better with manufacturers.

Hence, concisely, Avago might have paid a heavy amount now to buy Broadcom but this merger will benefit the company largely in the long term. Considering the prospect of it, it will become more stable in the upcoming times.