Report on Intels Acquisition of Mobileye

Document Type:Creative Writing

Subject Area:Finance

Document 1

The expected benefits of this transaction 2 THE RATIONALE FOR INTEL WISHING TO BUY AND MOBILEYE OFFERING TO SELL. Why INTEL wishing to buy 2. Why Mobileye offering to sell 3 THE STOCK RETURNS 3. Stock returns for INTEL (Before and after acquisition) 3. Stock returns for Mobileye (Before and after acquisition) 4 EMPIRICAL EVIDENCE, TAKOVER AND INVESTORS REACTIONS 4. Empirical evidence 4. Does this INTEL-Mobileye case support the empirical evidence findings? Explain. Explain how and why the investors have reacted to this news? 5 THE SUBSEQUENT TAKEOVERS AND THE CONCERNS OVER COMPETITION AND THE POTENTIAL IMPACT ON THE INTERNATIONAL TECHNOLOGY SECTOR. Subsequent Takeover Case 1 – (Company name) 5. Subsequent Takeover Case 1 – (Company name) 6 CRITICS AND CONCLUSION 1. The Details of the Deal 1. Describe the details of how the deal was carried The designers of the transaction were determined to ensure the deal will create free cash flow to both companies immediately it is complete. It is evident that Intel funds the entire acquisition process using the cash that has been posted on the balance sheet. The process is meant to take less than twelve months. According to the details provided therein, the board of directors from both firms is satisfied by the items captured by the agreement and it covers the required regulatory approvals as well as vital areas of concerns. However, it is notable that the offer is not dependent on any financing terms and conditions. However, due to the nature of this deal, an Extraordinary General Meeting of Mobileye’s shareholders had to be carried out so that to explore whether the offer was good for adoption, various resolutions attached to the transaction, and its relevance to other players.

Sign up to view the full document!

Even though the acquisition seems expensive, it is expected to propel Intel, which has been the largest computer chipmaker in the entire world into the highest positions in the supply of automotive products. This is important because Intel will be in a position to exhaustively explore the dynamics in another field within the global economy. Explain, whether this is a strategic, financial or conglomerate acquisition. Past history of Intel shows that it has partnered with other firms before, therefore, it is expected to have the ability to manage a wide range of operations (Ross, Westerfield and Jaffe, 1990). However, they are required to strengthen their potential to market and increase their level of production so that to ensure they maximize their profitability. In this deal, Mobileye is viewed as a minor organization.

Sign up to view the full document!

Therefore, its shareholders will expect the management to take advantage of lintel’s retained earnings. The most significant benefit of this conglomerate acquisition is the maximization of opportunities ad exhaustive spreading of risks within a wide range of components. Apart from developing chips, the institution has an explorative mapping technology. Even though Mobileye is known to be among the few firms that are presently creating a comprehensive form of technology, no company has mastered the art of providing every set of innovation attached to self-driving vehicles. Therefore, Intel and Mobileye together they will be in a position to integrate the needs of data-crunching with the dynamics of sensor technology. For long, Intel has been known to be a major supplier of personal computer systems but lost its relevance to the dynamic mobile revolution.

Sign up to view the full document!

However, the firm is still known for its extensive production of chips, synthesis of data, and exploration of computing structures. The company will be able to increase its hardware and software features. Second, it viewed it as an opportunity to increase job opportunities in Israel. By bringing in Intel, Mobileye plans to employ at least ten thousand more people. Mobileye was started and it is headquartered in Israel, therefore, it understands the culture and needs of their market making the transaction attractive (Lipson, 2003). Thirdly, by incorporating Intel’s car making team, Mobileye will still have an opportunity to continue working with most of its partners directly. For instance, Mobileye started working together with Delphi while NVidia partnered with Bosch and ZF, which supply hardware. Equally, NVidia was committed to power driverless cars that would be manufactured by Audi.

Sign up to view the full document!

The Stock Returns 3. Stock returns for INTEL (Before and after acquisition) According to Hunter (2018), Mobileye only has annual revenue of three hundred dollars. Therefore, most users are likely to consider the fifteen billion price tags as extremely expensive. which should increase every year thereafter. Stock returns for Mobileye (Before and after acquisition) Mobileye’s earnings increased by forty-nine percent; to three hundred and fifty-eight million dollars in 2016. This increment was propelled by one hundred and thirteen percent increase after the business activities. The aftersales business part of the company is the fastest growing section. Therefore, it implies that there are more recurring sales that occur in Mobileye. However, in corporate finance, analysts focus on the actions conducted by the managers and attempt to interpret the information propelled by them and the beliefs that guide their decisions.

Sign up to view the full document!

According to Lunden (2018), Intel increases its revenues by exploring a unique spending strategy and rolling out its expenses on items that have a high return on investment, promising technological projects, expansive artificial information, and acquiring of car-making companies. In the third quarter of 2017, Intel’s operating cash flow increased by thirty-three percent to six billion dollars. It used three billion dollars in capital expenditure, which led to the availability of three billion dollars in free cash flow. The company’s cash flow rose because it had received two billion dollars for a prepayment for long-term supply contracts stretching to 2018. For example, Qualcomm, Intel’s competitor that operates in a net cash position, will be forced to carry its activities from a net debt position, immediately it finalizes acquiring NXP Semiconductors. Given the aforementioned situation, Intel’s high leverage can be managed because its large free cash flow can service its debts without affecting its revenues (Krishnamurti, 2010).

Sign up to view the full document!

Therefore, most investors were positive about the actions undertaken by mobileye, but doubted Intel’s move because of its past non-performing deals. DISCUSS THE SUBSEQUENT TAKEOVERS AND THE CONCERNS OVER COMPETITION AND THE POTENTIAL IMPACT ON THE INTERNATIONAL TECHNOLOGY SECTOR. Subsequent Takeover Case 1 – Qualcomm and NXP According to Lunden (2018), Intel paid a premium that was sixty times the revenues received by Mobileye. However, the partnership was terminated after one of Tesla’s driver died while using a car that had Mobileye’s autopilot framework. Currently, Mobileye and Intel are working together with German automaker BMW to explore a situation whereby forty driverless cars will be channeled to the roads in 2018. Equally, both Mobileye and Intel are exploiting the utilization of fifth-generation chips in autonomous cars that are meant to be delivered in 2021.

Sign up to view the full document!

Furthermore, Mobileye has a deal with Delphi where they are working on availing structures to smaller automotive firms, which do not have enough resources to create their own frameworks. CRITICS AND CONCLUSION The competition among various companies has pushed Mobileye’s broad experiment management department to start exploring the possibilities of developing level four and five cars. SSRN Electronic Journal. Hunter, J. Intel to Buy Israeli Self-Driving Car Tech Mobileye for $15 Billion. online] LinkwayLive. Available at: https://www. online] Timesofisrael. com. Available at: https://www. timesofisrael. com/mobileye-says-intel-purchase-of-shares-delayed-again/ [Accessed 14 May 2018]. Beijing]: [Pearson Education]. Rijken, H. Advanced Corporate Finance. Harlow, Essex: Pearson Education Limited. Ross, S. Walter, I. The Infrastructure Finance Challenge. Cambridge: Open Book Publishers.

Sign up to view the full document!

From $10 to earn access

Only on Studyloop

Original template

Downloadable