Reuters: Broadcom CEO Hock Tan, a savvy operator of semiconductor industry mergers and acquisitions

Earlier this month, Broadcom CEO Hock Tan called VMware Chairman and Dell CEO Michael Dell and expressed his willingness to acquire VMware for $61 billion.

据路透社报道，Hock Tan今年70岁，在业界以擅长捕捉并购商机和控制交易成本著称。这笔交易将有助博通的市值推高到2250亿美元。

Hock Tan shakes hands with then-US President Trump in November 2017 (@Reuters)

Michael Dell and private equity firm Silver Lake are the main investors behind VMware. The former holds 40% of the company's shares. He has to make a decision in the face of acquisition offers. Because the global economy is slowing down, inflation is rising, and technology stocks are plummeting, he must insist on doing better deals, otherwise he will risk losses.

Broadcom eventually acquired VMware for $61 billion in cash and stock, a 50% premium to VMware's stock price. In order to seal the deal, Hock Tan also agreed to give VMware 40 days to find another higher bidder after the deal was signed, according to an unnamed insider, which was confirmed by VMware.

Broadcom has been keeping an eye on VMware for months. VMware was just spun off from Dell Technologies in November 2021. Broadcom had been concerned that Dell and Silver Lake would ignore the acquisition because shareholders risked losing their tax-exempt status if their companies entered into merger and acquisition talks within the first six months after the spinoff.

VMware CEO Raghu Raghuram wrote to his employees on the deal announcement, assuring them that Broadcom was not a company that put profits ahead of innovation. "Hock Tan is committed to fostering a culture of shared innovation," he wrote.

Hock Tan's acquisition strategy is shrewd and effective. He often targets companies with "franchise" characteristics in the industry and cuts off unnecessary investment projects that he believes have little value and have excessive marketing costs.

“He runs Broadcom like a portfolio company, even in seemingly independent business lines, and if he dominates a market segment, he’ll immediately raise money to launch an acquisition,” said a former employee who worked closely with Hock Tan.

Hock Tan and Broadcom did not respond to Reuters' requests for comment.

Hock Tan said he was a "skinny 18-year-old" growing up in Malaysia whose parents couldn't afford to send him to college. In 1971, Hock Tan entered engineering school on a scholarship from MIT. He later earned an MBA from Harvard University.

He held various executive positions in Malaysia and the United States before joining chip maker Integrated Circuit Systems in 1994, rising to CEO in 1999.

It was Silver Lake that recruited Hock Tan, who later became CEO of Broadcom, after he joined semiconductor company Avago Technologies in 2006, which Silver Lake and KKR had acquired for $2.66 billion the previous year.

As Hock Tan set out to consolidate the semiconductor industry, a series of deals followed, often backed by Silver Lake. In 2014, Avago spent $6.6 billion to acquire memory chip maker LSI Corp. In 2015, Avago went on to acquire Broadcom for $37 billion and renamed the company Broadcom. In 2016, Broadcom acquired network equipment maker Brocade Communications Systems for $5.9 billion.

In 2017, Broadcom launched a $117 billion hostile takeover of rival chipmaker Qualcomm in what would have been the largest tech deal ever. The U.S. government blocked the acquisition over concerns that Broadcom, then based in Singapore, would gain too much dominance in the U.S. semiconductor industry at the expense of innovation.

Hock Tan then turned his attention to software companies, which, like semiconductors, generate reliable cash flow. Broadcom Inc bought business software company CA Technologies Inc for $18.9 billion and the security unit of Symantec Corp for $10.7 billion.

After each acquisition, Broadcom used cash flow from its business to pay off much of the debt it took on to finance it. That emboldened Hock Tan to continue his buying spree, said Matt Britzman, an analyst at Hargreaves Lansdown. “Broadcom has quickly de-leveraged after each of its big acquisitions,” Britzman said.