Mergers and acquisitions may go slow
05/01/2008
By Hank Hogan
In one sense, the recent purchase by Entegris (Chaska, MN) of a stake in privately held Integrated Materials, Inc. (Sunnyvale, CA) is just the latest example of a tradition among semiconductor cleanroom equipment manufacturers: When there’s a downturn, merger and acquisition activity often picks up. Such activity is one way for companies to find somebody–or some technology–that can help them weather the economic storm.
For Entegris, the deal offers technology that extends the company’s product line into the processing chamber. Integrated Materials builds high-quality, high-temperature operation wafer processing boats out of polysilicon instead of the more traditional quartz or silicon carbide. That difference pays off, says Entegris vice president of corporate relations Steve Cantor. “The breakthrough advantage to the end customer is substantially higher yield and lower contamination.”
This improvement happens, he explains, because the boat is made of the same material as the wafer. While the actual yield bump is proprietary, one measure of the benefit is the mean time between preventative maintenance in a processing chamber. There, the savings can be close to 50 hours a month, says Cantor.
As for the deal itself, he notes that the initial phase is an investment by the larger company in the smaller one. The first phase will be followed by a second if certain closing conditions are met by the private firm. “The intention of Entegris is to buy the remaining equity within a relatively short period of time,” explains Cantor.
This deal isn’t the only recent merger and acquisition activity related to semiconductor cleanrooms. Within the last few months, Lam combined forces with SEZ in a seemingly friendly deal (See “Lam Hopes to Clean Up with SEZ,” CleanRooms, February 2008, p. 8). More combative was an unsolicited bid by Sumitomo Heavy Industries (Tokyo) with regard to Axcelis Technologies (Beverley, MA) and a similar offer from Aquest Systems (Sunnyvale, CA) and others for Asyst Technologies (Fremont, CA).
Although these deals involve companies of different sizes pursuing various strategies and technologies, they all revolve around the same economic realities, says Gartner research vice president Dean Freeman. “Smaller firms are struggling with trying to make margins, trying to be profitable. You really need a critical mass of a certain extent.” He estimates that a semiconductor cleanroom tool company needs to be in the $200 million annual revenue range.
In looking around for a solution to the problem of size, firms can come up with a friendly and mutual merger or attempt one that’s decidedly less congenial, but the drive to find some synergism and make a situation more profitable is always there and can be especially strong during a downturn.
The current tight credit environment, however, may limit the amount of such activity during this business cycle because funds may not be as readily available. Another brake on current mergers and acquisitions, notes Freeman, is that photovoltaics, light-emitting diodes, and other high-tech areas may be more attractive investment opportunities than semiconductor manufacturing equipment.
The issue isn’t the tools but rather the market they serve. “The biggest problem in the semiconductor space right now is growth overall is only going to be on a 5 to 8 percent CAGR,” says Dean.