Intel's M&A Chief Has Incentive to Improve Deal Track Recordby
Chipmaker closes $16.7 billion purchase of Altera Corp.
Greater focus on follow-through to make merger a success
Intel Corp. Vice President Wendell Brooks, a former investment banker who now heads the chipmaker’s merger and acquisitions efforts, said he has an extra incentive to make sure the company’s biggest-ever purchase pays off better than previous deals.
The company on Monday closed its $16.7 billion acquisition of Altera Corp., adding programmable chips to its efforts to cement market dominance for server components and expand into new areas such as the increasing use of computing in cars and industrial equipment.
Intel’s acquisition of McAfee Inc. for $6.59 billion in 2011 -- previously its biggest deal -- and the purchase of Infineon Technologies AG’s baseband unit in 2010 for about $1.4 billion have so far failed to generate meaningful profit from software or give the company a foothold in mobile devices, financial data show.
“As the new guy here, I’m not going to get the benefit from my board or my shareholders to do future M&A if I don’t get this one right, so I’m very much focused on improving our track record,” said Brooks, who joined Intel in August 2014 from Allen & Co. “There’s general acknowledgment within the executive team and the board at Intel that we haven’t done as well as we could do on past acquisitions.”
To break the pattern of the promises of deals not being fulfilled, Brooks said that integration planning is now part of the rationale used for approving acquisitions. He has tripled integration staffing and is “not messing” with Altera’s sales force or core engineering teams.
While Altera’s sales -- $1.9 billion in 2014 -- are just a fraction of its new owner’s $55 billion, integrating its chips’ capabilities onto the same piece of silicon as Intel’s processors will open new markets, the company has argued. Intel also intends to improve Altera’s stand-alone performance by transitioning manufacturing of its semiconductors to its leading-edge production, Brooks said.
“Having done M&A most of my career and not had to experience and live with making integration work, I very much focused on this transition on the back-end capabilities and making sure we looked at it with the same rigor and thoroughness as we looked at the front end of a transaction,” he said. “We’ve done some things very differently here.”