Opinion: Will someone else buyArm?

Opinion: Will someone else buyArm? ...

Softbank might be able to withdraw from its investment, something that it has repeatedly stated it is eager to obtain. Arm's executives might be able to savor public opinion without worrying about competing against it. Licensees may be able to trust Arm's much-needed roadmap without having a competitor dominate it to the detriment of everyone else.

Jonathan Goldberg, guest author, is the founder of D2D Advisory, a multi-functional consulting business. He has developed innovative growth strategies and alliances for companies in the mobile, networking, gaming, and software industries.

The practicalities, however, are far less straightforward. The first question would be how would the company be able to function as a single, private entity. This likely would involve inviting in a private equity investor. However, any such investor would be motivated primarily by financial returns rather than strategic goals of all others in the consortium.

As with any situation, it is unclear how or if Arm would get the capital it has repeatedly requested; private equity isn't well-known for research and development investment. So ultimately, Arm will have to go public at some point, but perhaps this route gives them a much longer window to prepare for that.

The second difficulty can best be described as 'how to herd a bunch of cats.' This large pool of potential participants is quite extensive, with a wide variety of competing interests. Each of them would operate on the basis of protecting their individual strategic interest, thus likely to have some influence on the new company.

This isn't a difficult situation, but it means that complicated negotiations will be required to align everyone's incentives. The real issue here will be how do the various blocks fit together, and who gets a decisive vote that will have an enormous impact later on.

Another important issue is what this will mean for everyone else. We have written extensively about Arm's current pricing structure, which penalizes newcomers to the benefit of large established customers. If those large customers decide to take control of Arm, then the one thing they can all agree on will be further enforcing this conflict.

We can only assume that China's government will sign on to the agreement if Chinese businesses join the consortium, but there are others. Tsinghua Unisoc is the most likely candidate, but there are others.

HiSilicon, a subsidiary of Huawei, is a well-known Arm licensee, and they are showing signs of re-emerging from the US Government's proscriptions against them. Would they be permitted to participate? And since the conclusion of the Arm China soap opera, Arm has been on a tear there signing a lot of agreements. What will all of those companies say about some new American owners?

We suspect that some, somewhere is recurring in the midst of a similar transaction. Arm's bankers must at least consider the possibility as an alternative to an IPO in the end.

The public markets have already given some pretty clear signals on the value of an Arm IPO, which is well below the $40-ish billion offered by Nvidia. The answer to that will depend on how much of a premium they will pay for control of the corporation, which is obviously not the case.

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