Apax Buys Dialog in High-Speed, Back-to-Back Deal

Less than four weeks after Apax Partners was approached by Ericsson as a potential buyer for Dialog Semiconductor, the private equity house completed the deal, which was valued at more than $30 million (ecu 27 million).

The background to the sale of the German-based supplier of mixed-signal ASICs (Application Specific Integrated Circuits) is convoluted. Dialog originated as a private-equity-backed joint venture with IMP of the US in the mid-80s. Although Dialog’s products attracted high-calibre customers. sales volumes were disappointing, and in 1990 two of its customers, MBB and Ericsson, bought out the previous investors. MBB, a Daimler-Benz subsidiary, took a majority stake. Subsequently, Dialog was integrated into Daimler’s semiconductor division, Temic.

Last year, as part of a major restructuring programme, Daimler agreed to sell Temic to Vishay Intertechnology of the US. Since Dialog’s management felt the company had not benefited from being part of a larger group, they decided to seek a route to independence.

This lay in the minority holding still owned by Ericsson, which had an option that entitled the Swedish group to acquire the balance of Dialog at market price. Since Ericsson does not acquire majority holdings in its suppliers, resale needed to be arranged rapidly. It was in this context that Ericsson approached Apax, once Vishay had fixed a price for Dialog with Daimler-Benz.

Apax, whose London and Munich offices worked together on the transaction, signed the deal on 28 March. Apax has majority control of Dialog. It was joined by Adtran of the US, one of Dialog’s customers, which invested for a 16% stake alongside Ericsson, which has retained a 7% holding. Dialog’s management has a 10% holding, with further share options available to management and key staff. Deutsche Bank provided working capital facilities for the deal.

Apax partner John McMonigall said: “We have specific experience of working on complex cross-border deals and were delighted to receive the approach from Ericsson, who viewed us as a partner who could move quickly. Working in close liaison with our German office, we were in an excellent position to respond rapidly and effectively to this opportunity”.