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The biggest surprise about the _8.3 billion leveraged buyout of the semiconductor division of Royal Philips is that it was expected - albeit not as an LBO. Philips initially planned to spin out the unit, today called NXP, in an initial public offering beginning as far back as 2004. And for all the heralding that IPO preparedness is really a dual-track process these days, getting this deal done as an LBO nonetheless required a 24-hour operation lasting several months, spanned teams on three continents, included warring consortiums bidding for the assets, and set a major milestone for the semiconductor industry. As such, the Philips/NXP LBO is IDD's Technology Deal of the Year.
"The NXP transaction was a watershed event," explains Dieter Turowski, managing director, European M&A, Morgan Stanley, which acted as the sell-side advisor to Philips. "It demonstrated a willingness for financial sponsors to assume a degree of industry risk that previously was not thought possible."
While underwriters had been hired for the anticipated IPO spinout, in April 2006 Philips still decided to invite private equity firms to bid on a 20% stake in the semiconductor unit. It was these initial conversations that eventually pulled Philips off the IPO track and placed an LBO into play.
"The private equity deal had advantages, such as the deal was not dependent on industry synergies, the contract was not...