Did private equity make a difference to NXP and Freescale?

The company was formed when Royal Philips Electronics span out its semiconductor operations in 2006, then sold 80% of the shares in the new company to a group of private investors led by New York based KKR. The group paid $6.4billion for the shares, valuing what was to become NXP at $8.3bn. Philips retained a 20% stake, which it has since divested. Now, the investment group is placing more than 17million shares in NXP on the market for $60.35 per share. The offering is expected to close on 19 May and NXP will not receive any revenue from the sale. It's not the first sale the group has made. In 2010, an IPO on the New York Stock Exchange was planned to raise more than $1bn, but ended up raising $476m. Meanwhile, NXP has been quietly buying back a lot of its shares. A quick look at the company's financial statements appears to show – at least to this untrained eye – that things are pretty much the same as when the acquisition was made in 2006. NXP was not the only company to be targeted in this way. Freescale underwent a similar experience following its spin out from Motorola. Not long after the NXP/KKR deal, a consortium led by Blackstone Group made a $17.6bn offer. While the jury is still out on the benefit of this deal, Freescale is slowly paying off its long term debt and inching back towards profitability, but it's been a long haul. When the two acquisitions were made, industry observers expected the attractive elements of both companies to be sold for a healthy profit. That didn't happen, mainly because the semiconductor market headed south pretty quickly; even if the investors did have the ambition to 'strip them for parts'. So historians are likely to ask whether these and similar deals were worthwhile. Apart from getting both companies to focus a bit more on their core competences, did the involvement of private equity make a difference? Without the benefit of some serious hindsight, that's a question which will remain on the table.