Broadcom eats Element 14
From mighty acorns little chips grow
Element 14, the bit of Acorn left after the veteran British company was dismembered for its ARM shareholding, has been bought by Broadcom for $594 million in shares.
Essentially, Element 14 is a chip design team rather than a company, with skills particularly in DSP and ADSL design. There are 68 employees, who own 40 per cent of the company - now worth $240 million.
In an interview with the FT, Stan Boland, Acorn CEO, said the valuation of the company is "very similar to what we would have received in an IPO". In which case, Broadcom is paying a huge premium for Element 14, considering that the company was not planning a flotation until the end of 2001, or the beginning of 2002. Typically, a company would expect a hefty discount in a trade sale - certainly it would not expect to pay the same price as retail investors 15-18 months down the line.
The transaction price represents a 25-fold jump in valuation on the company's imputed start-up capitalisation.
In August 1999, Element 14 won $13 million in funding from a bunch of VCs led by Atlas Ventures. This was described at the time as the largest amount ever secured for a European silicon start-up. ®
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