Insight Bite: Nvidia Wins Against Xilinx and Intel in Bidding war for Mellanox

After a competitive bidding war thought to include rival chipmakers Intel and Xilinx, Nvidia have agreed to purchase Mellanox with a cash offer for all shares at a 14 percent premium.

At 6.9 billion, the deal is the biggest in Nvidia’s two-decade history, and reflects the chipmakers efforts to reposition itself amidst the changing tides of the semiconductor industry. Like its competitor Intel, Nvidia reported poor performance during the final quarter of 2018, which analysts pinned on two phenomena – the falling price of bitcoin, which has subsequently created a drop in demand for crypto mining chips, and deteriorating graphics card prices, which some suspect is due to a slowdown in the gaming industry.

But as one market falls, another rises, and Nvidia CEO Jensen Huang is now banking on a new wave of technologies to fuel growth. In statements, Huang has revealed an interest in robotics, artificial intelligence, and cloud data centers – which are thought to be central to the motivation for purchasing Mellanox.

“The emergence of AI and data science, as well as billions of simultaneous computer users, is fueling skyrocketing demand on the world’s datacenters” said Jensen Huang, founder and CEO of NVIDIA. “Addressing this demand will require holistic architectures that connect vast numbers of fast computing nodes over intelligent networking fabrics to form a giant datacenter-scale compute engine.”

A networking company specializing in data centre connectivity, Mellanox has been fought over by tech giants thought to be seeking to capitalise on the ongoing development of cloud data centres. To win out its competitors, Nvidia paid a considerable premium, but according to Mellanox CEO Eyal Waldman, the companies also share key principles: “We share the same vision for accelerated computing as NVIDIA,” said Waldman in a statement, “combining our two companies comes as a natural extension of our longstanding partnership”.

After a flurry of dealmaking in 2015 and 2016, the semiconductor merger and acquisition market has been cooling off amid regulatory concerns, which have recently been exacerbated by the uncertainty of trade talks between the US and China.

But regulatory scrutiny can’t stifle emerging technologies like IoT, AI, and the Cloud, which continue to drive change in the semiconductor industry. To stay relevant in this changing technological landscape, manufacturers must pivot, and Nvidia’s most recent acquisition is a standout example of semiconductor manufacturers using acquisition to expand their focus in the face of change.

About Acuity Advisors

We know technology – that’s why we’re the industry’s trusted M&A advisor. Our partners are senior players in tech and M&A: skilled at getting to the heart of a technology business, understanding what will attract buyers, and building long-lasting relationships. We have an unrivalled understanding of the industry’s complexities and personalities – our track record and client feedback are compelling evidence of that. We’re an international firm – most of our deals are cross-border, from offices in London, Munich, Shanghai and Silicon Valley – but we’re grounded in our approach. We move quickly when it’s needed, and we’re around for the long haul when patience is a virtue. We’ve maintained a very high success rate across hundreds of deals while keeping our focus on doing what’s right for our clients. From first meeting to successful exit, we earn the trust that clients and investors put in us. Read more…

© 2019 Acuity Advisors Limited

A conversation is never wasted. We’re confident that we can give you all the help you need, but we’ll tell you if we think there’s a better option for you.

Get in Touch Get in touch now