TT Electronics (TT), a Woking, England-based semiconductor corporation, announced it completed its $43.3 million acquisition of Torotel Products, Inc. The Olathe, Kansas company specialized in fabricating high-reliability power and magnetics components.
Now that the transaction is complete, Torotel will operate as a wholly-owned subsidiary of its corporate parent.
Why TT Bought Torotel
For over a century, TT has been a significant player in its national components sector. Its diverse catalog and robust research and design facilities enabled it to remain competitive in a rapidly evolving industry. In recent years, the British chipmaker has sought to expand its presence in the United States multiple times with strategic acquisitions.
In 2018, TT electronics snapped up a Minneapolis-based electromagnetic products firm called Precision, Inc. One year later, it bought a Boston headquartered components vendor called Power Partners. It also acquired Excelitas Technologies’ defense electronic parts unit, located in Covina, California, earlier this year.
By making those deals with American companies, TT significantly built out its U.S. aerospace and defense product portfolio. In doing so, it positioned itself to address a $20.74 billion market opportunity. With any luck, the corporation’s current strategy will enable it to transform from a £478.2 million ($630.4 million) firm into a billion-dollar enterprise.
TT’s purchase of Torotel is also likely to be a good thing for the American company. In December 2019, Standex International Corporation announced it would buy the power and magnetics part business for $48 million. But the purchaser called off the merger this April, which prompted Torotel’s stock to plummet 83 percent.
Torotel’s newly finished deal with TT will make its financial backers whole and bolster its long-term prospects.
The Long-Term Implications of Semiconductor Industry Consolidation
TT and Torotel’s combination is the latest example of the 2020 merger and acquisition trend within the semiconductor industry.
According to research firm IC Insights, the value of tie-ins in the sector hit $63.1 billion by October. This year’s new record M&A activity has been driven by Analog Devices buying Maxim integrated for $20 billion, and Nvidia’s announcement it would acquire Arm for $40 billion. Advanced Micro Devices (AMD) further accelerated the trend by revealing it would pay $35 billion to take control of Xilinx.
Admittedly, not all the above-listed transactions have gone through yet. Though Analog Devices closed its deal, Nvidia and AMD still need multinational regulatory approval to expand their holdings. But if those mergers are completed in 2021 as scheduled, the component sector will be radically altered.
The semiconductor industry’s market leaders will hold unprecedented development resources and influence. That means smaller firms will have to work harder to make product sales and procure raw materials. More companies may follow TT and Torotel’s example and combine forces to survive in the more competitive landscape.
That means 2021 could see a high level of semiconductor industry consolidation among small and medium-sized enterprises.