Case Study

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The Situation

Gaard Automation, based in Portland, OR, designs and manufactures CMP (Chemical Mechanical Planarization) equipment for chip manufacturers. Intel was their primary customer. These robotic machines polish the wafers from which semiconductor chips are manufactured. Gaard's key differentiating strength was that their machines could polish the wafers smoother than any competitor. This was a significant advantage.

The Response 

T.V. Metz & Co., LLC was engaged to negotiate the transaction to achieve the best price with the buyer. The buyer, Integrated Process Equipment Corp. (IPEC), was a publicly traded company based in Phoenix, AZ and it had expressed serious interest in acquiring Gaard. The family-owned company needed assistance getting the deal negotiated at the best price and the most favorable terms.

We researched the CMP industry and examined IPEC in depth. We performed financial modeling on Gaard to determine a valuation range. We also performed financial analysis on IPEC to estimate its long-term value vis-à-vis its stock price. After a series of meetings with IPEC, it became clear to us that the Gaard technology would be of great benefit to IPEC and would give the firm a significant competitive advantage.

The Solution 

We negotiated a price for the transaction ($30 million) which was at the high end of the valuation range based on its strategic importance to IPEC. 

Initially the companies had discussed a transaction in which payment would be made with shares of IPEC stock. We priced the company at a higher valuation because it was a stock deal. However, in our financial analysis we determined that the price of IPEC stock was quite high given its history and growth prospects. (At the time, this would have been a pooling transaction and the Gaard shareholders would not be able to sell their IPEC shares for at least two months; they view this as an unacceptable risk for them.) Our client's risk preference was low, so we negotiated a slightly lower price, but based on an all cash transaction.

The transaction closed successfully a few months later. Both sides were pleased with the transaction, especially the family owning Gaard Automation's shares. They received a price that was 50% higher than they originally had hoped to receive.

In Review 

The key to this transaction was understanding the nature of the strategic fit between the two companies and particulary the importance of Gaard's technology to IPEC.