Greater than two

The acquisition of Linear Technology by ADI, which brought together the two leading analogue and mixed signal design houses a year ago, shocked many industry observers.

Here was a deal that ended Linear’s valued independence after 35 years, and customers were concerned that the levels of technical support and service they had grown use to, could come to an end.

ADI’s offer certainly made financial sense and followed a trend, within the semiconductor industry, which had seen a string of major deals and consolidation.

Speaking at the time, ADI’s President and CEO, Vincent Roche said, “We believe this is the right deal at the right time in the analogue industry.” Bob Swanson, Linear’s co-founder and Executive Chairman said that while Linear hadn’t been “on the block for sale”, the business merits of the deal swayed their decision. The fact that the deal valued the business at over $14billion may also have played a significant part.

Crucially, when the announcement was made, it was made clear that neither company competed in the same product or customer space. And, as such, the move was completely complementary.

So, a year on, what has been the impact of the acquisition, and can it be viewed as a success?

According to Jackie Rutter, Director of Marketing for the EMEA region for ADI, the answer is a resounding ‘yes’.

“In truth, it’s felt more like a merger than an acquisition. It’s not been without its challenges, but it’s been a relatively smooth transition. That has in no small part been down to the fact that there’s a lack of overlapping competencies and because we work in very different product areas.”

It’s made the integration less contentious, and certainly, more straightforward, according to Rutter.

“With our respective product portfolios, each company dominates in one particular area. We rarely came up against one another when competing for business, prior to the acquisition.

“Linear tended to focus on the broad market, while ADI’s focus was on much larger corporate customers.

“We’re now in the enviable position of being able to offer a much broader portfolio of products, which has proved extremely beneficial to the business as we look to move up the stack and offer customers greater value.”

Rutter conceded that customers did express worries about the new business, in part because they thought they’d lose the excellent technical support that Linear provided, and were concerned that the new entity might not continue specific policies, such as Linear’s commitment to non-obsolescence.

“None of that has changed and we’re still providing the broad market with access to the full signal and power chain.”

Greater than two

“Linear’s product portfolio has filled gaps in the ADI portfolio and the idea that 1+1 will be greater than 2 (i.e. that the sum of the merged business can now offer more than the two companies could have done), has certainly lived up to expectations,” Rutter suggested.

“We’re able to offer more choice of product which has meant that we can address and move with the market towards providing a more solutions based approach. Today, customers talk about solutions and much less about products.”

The solutions approach means that customer requirements are changing, but ADI’s much broader portfolio and in-house expertise means it is well positioned to address this.

“Our key markets now include the IoT, smart factories, autonomous driving, electrification and battery management. The industrial space and healthcare are becoming more important segments.

“We’ve now even re-entered the consumer space, a market Linear exited back in 2008.”

The market ADI is looking to address is fast paced and the problems design engineers are confronted with are getting more complex.

“Today, our sales engineers can visit customers and offer a choice of products across the whole signal chain, and that’s a significant differentiator when it comes to our competitors.” Rutter continued, “But the nature of the discussion has also changed and now ranges across software and data analysis, not just the product.”

That trend has seen ADI make a series of strategic acquisitions, such as Hittite and Innovasic, and further ones are planned, according to Rutter.

“The decision to buy in the necessary technical skills brings with it the challenge of integration,” which Rutter conceded was probably, “the biggest stumbling block when it came to the acquisition of Linear.”

“It was a challenge and the success we’ve had to date, can be attributed to meticulous planning on the part of both businesses. That’s not just been at the customer level, but at the systems level as well. Most of our processes are now integrated. We’re probably 80 percent of the way there.”

According to Rutter, what has made the acquisition such a success, and more like a merger, has been the fact that both businesses, at whatever level, have taken the time to listen and better understand one another.

“Too many acquisitions result in unnecessary restructuring, job losses and lost momentum. ADI wanted to keep hold of what it bought. It didn’t just want our IP or range of products, but the business and the talent that existed within it. It didn’t want to break Linear up and once that was understood, it turned into more of a merger.”

ADI understood the value of the Linear brand, a brand that was recognised by thousands of customers. The way in which the acquisition has proceeded suggests that ADI clearly understood that.

The cultural differences between the two companies, Linear was once described as the world’s biggest start-up, while Analog Devices had a more traditional corporate structure, could have caused problems.

And while Rutter doesn’t play them down, she suggested that everything is running smoothly.

“Linear certainly had to adapt. Ours was a much flatter structure and certainly more dynamic. Force of personality often won the day at Linear, but at ADI, consensus is the number one priority and that’s driven by policies, procedures and committees.

“For anything like this to succeed you have to go in with an open mind and accept change, because change will inevitably happen. And for both businesses the benefits have certainly outweighed any downside.”

Rutter pointed to the fact that of the 5000 staff that make up the EMEA region of ADI, only 2 people resigned, in part, because of the acquisition.

“That surely says something about the approach taken by Analog Devices and the emphasis it has placed on finding a consensus.”

ADI is on course to report revenues in excess of £6bn this year and the success of the acquisition - or should that be ‘merger’ - has brought with it more creativity, customer engagement and cross selling.

It remains early days, but the signs are looking good and the old adage, that, ‘opposites attract’, could be used to describe what is proving to be one of the more successful acquisitions of recent years.