How We'll Clean Up in This Tech M&A Boom

Michael A. Robinson

When we talked last Wednesday, I told you about three tech leaders whose stocks are quickly rebounding – giving you three solid ways to profit following the market's recent retreat.

I also promised to reveal a fourth investment that could add to your net worth over the long haul. Today I'm going to make good on that promise.

This investment takes advantage of one of the biggest trends in tech right now – the rapid consolidation of the semiconductor industry.

In fact, a new Dealogic report says that chip firms have announced $100.6 billion in mergers and acquisitions (M&A) so far this year – more than triple the $37.7 billion for all of 2014. And we've still two months to go in 2015.

But there's much more to this story than just dollar volume.

A very important facet of these deals has gone largely unnoticed.

Today I'll show you a great way to play this historic chip M&A boom using an investment you'll want to own for the long haul.

And I'll also tell what that "secret" detail is… 

The "Secret" Story

According to Dealogic, last year saw 369 M&A deals. This year, the number of transactions has dipped about 25% to 276.

While there are fewer deals this year, if you only focus on the raw number of deals, you'll miss the real story: the sheer size of many of this year's M&A deals.

In fact, what's going on is so profound that I believe that, for the semiconductor industry at least, 2015 will go down as "Year of the Mega-Merger."

Last year, the average chip M&A deal booked a value of $102 million, while this year, the average deal is more than three times as large – $364.5 million.

And IC Insights reports that in the first half of this year alone, the average deal was about six times larger than the average deal size over the 2010-2014 period.

And even those comparisons understate the true scale of things. Take a look at a sample of some recent M&A.

On Oct. 21, disk-drive maker Western Digital Corp. (Nasdaq: WDC) agreed to buy SanDisk Corp. (Nasdaq: SNDK) for about $19 billion in cash and stock. SanDisk specializes in chips used to store computer data.

That very same day, Lam Research Corp. (Nasdaq: LRCX) announced a deal to buy KLA-TencorCorp. (Nasdaq: KLAC) for $10.6 billion. Both firms make equipment used to produce semiconductors.

Earlier this year, global chip leader Intel Corp. (Nasdaq: INTC) agreed to buy Altera Corp. (Nasdaq: ALTR) in a deal worth some $16.7 billion.

Around that same time, the industry saw the largest deal so far this year when Avago Technologies Ltd. (Nasdaq: AVGO) said it's buying rival Broadcom Corp. (Nasdaq: BRCM) in a deal valued at $37 billion in cash and stock.

What's Driving the Tech M&A Boom

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Michael A. Robinson

About the Author

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Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.

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