What does the £24bn ARM buyout mean for the IT channel?

Japan’s Softbank has agreed to acquire ARM in a deal worth £24.3 billion.

The deal, which will see Cambridge-based group ARM, whose chips are in 95 per cent of smartphones – including the iPhone – will see Softbank pay £17 per share.

This is set to trigger multimillion pound windfalls for many ARM board members, including the chief executive, Simon Segars, whose shares are worth more than £11 million, and the chief operating officer, Mike Muller, whose stake is valued at £21 million.

Stuart Chambers, the chairman of ARM, said: “This is a compelling offer for ARM shareholders, which secures the delivery of future value today and in cash. The board of ARM is reassured that ARM will remain a very significant UK business and will continue to play a key role in the development of new technology.”

The board are currently recommending shareholders to accept the £24.3 billion offer which is valuing the company at a significant premium to its market value of £16.8 billion. 

There are several conclusions that can be drawn from the deal. 

For starters, it is apparent that in spite of the economic turmoil that is going on due to Brexit, the UK still remains fertile ground for foreign investment. In fact, thanks to the weakend position of the pound, many industry watchers are predicting a new wave of foreign takeovers.

That Softbank has offered ARM almost 45 per cent of their value in excess of what the company is actually worth, shows that they are eager to get the deal done. The fall in the value of the pound against the yen has made the deal about 12 per cent cheaper for SoftBank than before the referendum result on June 24th.

What also can be concluded is that the government will no doubt welcome foreign investment in a post-Brexit world.

The newly appointed Chancellor Phillip Hammond reacted to the news of the takeover by saying that "Britain is open for business – and open to foreign investment.

"Softbank’s decision confirms that Britain remains one of the most attractive destinations globally for investors to create jobs and wealth," he added.

In terms of the UK tech channel, things are also looking optimistic.

As previously mentioned, Chambers claims that ARM ‘will remain a very significant UK business’, and all signs look that this will be the case, with Softbank committing to doubling the size of ARM’s UK-based workforce over the next five years.

The company’s massive expansion will have a knock-on effect, as more components will be available and everyone in the channel should benefit, from vendors to suppliers and resellers.

While the deal is undoubtedly good news for ARM’s investors and for the government to wave the the flag of lucrative investment opportunities, this shocking and unexpected development presents a great unknown for the UK tech channel in the longer-term.

What do you think of the news, and how do you think it will affect the channel? Let us know here.

Check out the next issue of PCR for more analysis.