Buying Dialog Semiconductor to break the automotive dependence — a third mega-deal (2021)

Rebuilding the portfolio through three acquisitions

The nature of this decision emerges only when Intersil, IDT and Dialog are read as one continuous move. A company once saved by state support, squeezing out profits through restructuring, spent roughly ¥1.7 trillion in the space of a few years and rebuilt a product line that had been nothing but automotive microcontrollers into one spanning power, connectivity and analogue. The swing — from surviving by defending to making purchases larger than its own equity — is where the boldness of this sequence of judgements shows. Dialog was the capstone, the deal whose job was to bring the automotive share down in the numbers.

Yet a balance sheet funding more than ¥600 billion through a mix of borrowing and equity was also a tightrope walked on the assumption that the next upcycle would come. The debt swollen by successive large acquisitions was paid down faster than expected thanks to the tailwind of the pandemic chip shortage, but that tailwind was not promised at the moment the deals were signed. This was a bet that works only when the willingness to carry the weight of debt into a trough is matched by the nerve to hold the line until the peak arrives — and behind the achievement of reduced car dependence lies the size of the swing that financial strategy carried.