IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

Arun has over 15 years’ experience covering the Technology sector. During this time, he has worked with technology start-ups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group and Clear Capital. He has a dual Master’s degree in Financial Engineering and Industrial and Operations Engineering from the University of Michigan. He obtained his Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Bombay. He is also a CFA charterholder.

IPOs and Catalysts/Events

Thoughts on Amazon –What Does Its Valuation Tells Us?

Netflix & Amazon Expand in Korea – Not a Coincidence

Okja: The Fight Between Netflix Vs. CJ CGV

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<p><a href="https://www.smartkarma.com/entities/969" target="_blank" data-smartkarma-citation="entities:969:1">Qualcomm Inc (QCOM US)</a> received an unsolicited $130 billion offer from <a href="https://www.smartkarma.com/entities/998" target="_blank" data-smartkarma-citation="entities:998:1">Broadcom Limited (AVGO US)</a>, in what could be the largest tech deal in history.  We believe that Qualcomm should reject Broadcom’s offer due to:</p><ol><li>The timing of offer strikes us as opportunistic as Qualcomm's share price is depressed due to its ongoing dispute with <a href="https://www.smartkarma.com/entities/666" target="_blank" data-smartkarma-citation="entities:666:1">Apple Inc (AAPL US)</a>.  </li><li>Broadcom's offer values Qualcomm (including NXP) at an EV/Revenue of 4.1x and EV/EBITDA of 11.8x. Our analysis of major semiconductor M&amp;A deals since 2015, indicates a median takeout multiples of EV/Revenue of 5.3x and EV/EBITDA of 22.3x. These multiples suggest that Broadcom's offer for Qualcomm is 20-50% discount to industry acquisition multiples. </li><li>Broadcom is low-balling cost synergies by factoring $3 billion of cost synergies. This cost synergy represents 9% of the combined operating cost base. Examining the announced synergies of major M&amp;A semiconductor deals, the average cost reduction as a percentage of the combined operating cost base is 12%.</li></ol>

Qualcomm Inc (QCOM US) received an unsolicited $130 billion offer from Broadcom Limited (AVGO US), in what could be the largest tech deal in history.  We believe that Qualcomm should reject Broadcom’s offer due to:The timing of offer strikes us as opportunistic as Qualcomm's share price is depressed due to its ongoing dispute with Apple Inc (AAPL US).  Broadcom's offer values Qualcomm (including NXP) at an EV/Revenue of 4.1x and EV/EBITDA of 11.8x. Our analysis of major semiconductor M&amp;A deals since 2015, indicates a median takeout multiples of EV/Revenue of 5.3x and EV/EBITDA of 22.3x. These multiples suggest that Broadcom's offer for Qualcomm is 20-50% discount to industry acquisition multiples. Broadcom is low-balling cost synergies by factoring $3 billion of cost synergies. This cost synergy represents 9% of the combined operating cost base. Examining the announced synergies of major M&amp;A semiconductor deals, the average cost reduction as a percentage of the combined operating cost base is 12%.

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