Broadcom to Acquire CA Technologies: $18.9 Billion Deal

On the heels of a failed bid to acquire Qualcomm, Broadcom to acquire CA Technologies, an IT Software Provider,  in an $18.9-Billion deal.

Quick Overview: Broadcom is primarily known for their leadership in the semi-conductor space providing key components to manufacturers of network equipment. CA is well known for their production of critical software for traditional and cloud based applications. They have also made significant inroads as a leader in software for applications driving enterprise Automation.

Executive Commentary:

From Broadcom: Hock Tan, President and Chief Executive Officer of Broadcom, said, ‘This transaction represents an important building block as we create one of the world’s leading infrastructure technology companies. With its sizeable installed base of customers, CA is uniquely positioned across the growing and fragmented infrastructure software market, and its mainframe and enterprise software franchises will add to our portfolio of mission critical technology businesses. We intend to continue to strengthen these franchises to meet the growing demand for infrastructure software solutions.’

From CA: ‘We are excited to have reached this definitive agreement with Broadcom,’ said Mike Gregoire, CA Technologies Chief Executive Officer. ‘This combination aligns our expertise in software with Broadcom’s leadership in the semiconductor industry. The benefits of this agreement extend to our shareholders who will receive a significant and immediate premium for their shares, as well as our employees who will join an organization that shares our values of innovation, collaboration and engineering excellence. We look forward to completing the transaction and ensuring a smooth transition.’

Analyst Take: Broadcom has seen a lot of its growth and returns to shareholders coming on the heels of acquisitions followed by obvious efficiencies that led to the acquisition. Broadcom to acquire CA Technologies is strange to me. While it clearly provides a new book of business and likely higher margin business, there are no clear synergies in the current product portfolios that would allow Broadcom to maximize returns in the fashion that they historically have done so. Given the size of the acquisition, I rate this as more of a revenue run-up and short-term win for shareholders than a clear high-synergy acquisition. While, I’m optimistic that the resources of Broadcom can only help CA, I hope for the sake of CA and their current employee and customer community that they are given significant autonomy to operate adjacent, rather than underneath the Broadcom umbrella in order to continue on their innovative path into cloud and automation software.

Daniel Newman