DisplayLink sold for $305m cash to Synaptics in deal valued at $407m
World leading semiconductor and software technology company DisplayLink has effected one of the most remarkable turnarounds in Cambridge corporate history with a $305 million cash sale to US company Synaptics.
As DisplayLink has $102m net cash the full value of the deal is nearer $407m.
The deal is expected to close in Synaptics’ first quarter of fiscal year 2021. Synaptics expects the transaction to add approximately $94m in annualised sales and be immediately accretive to non-GAAP gross margins, non-GAAP operating margins and non-GAAP earnings post-close.
DisplayLink will continue to operate in Cambridge where it recently scaled to a new UK headquarters at the Science Park but inspirational CEO Graham O’Keeffe intends to bow out to pursue a fresh challenge.
DisplayLink has transformed itself from the brink of penury in its formative years to a globally influential technology innovator with a holding company incorporated in Washington State, a mothership in Palo Alto and key operations in the UK, Europe and Asia – including Taiwan and Japan. The company, which has 300 staff, has twice won Business Weekly Awards.
The business was founded in 2003 as Newnham Research, changing its name to DisplayLink in 2006.
At one stage it faced a near death experience and radical management changes were effected: DisplayLink has had six CEOs and five CFOs in its 17 year history.
O’Keeffe and CFO John Lee first steadied the ship, then steered it off the rocks and turned it from a holed vessel into the corporate equivalent of a super yacht.
Over time the company has received $80 million in four rounds of venture capital financing from Atlas Venture, Balderton Capital, Draper Esprit, DAG Ventures and Cipio Partners.
Its annual accounts filed at Companies House to December 2019 showed sales of $93.664m and profits of $30.835m with over $102m net cash. It claimed last year to have shipped over 35 million chips.
DisplayLink’s technology has enabled many of the home working and video conferencing solutions that we have come to rely on to remain productive during the coronavirus lockdown.
Companies such as Dell, HP, Lenovo and Logitech use DisplayLink’s silicon devices in their docking station and video conferencing product ranges.
DisplayLink’s is an incredible turnaround story for a company that was, according to inside sources, ‘running on fumes’ just nine years ago.
Struggling to raise money during the last economic downturn, and with a large overdraft, O’Keeffe stepped in as executive chairman, recruiting as CFO John Lee whose previous experience included stints at Sinclair Research, Velocix and CamSemi.
O’Keeffe was already an experienced semiconductor investor, having backed Element 14, Icera, Picochip, Ubiquisys and Phyworks, all of which ended up being acquired by much larger US companies for well over $1 billion in total. Focusing on a core business of designing chips that helped giant PC vendors connect laptops to multiple screens via a single USB cable, DisplayLink created a unique brand akin to ‘Intel Inside’ that IT managers trusted to “just work.”
DisplayLink has also sold its chips to HTC for their wireless virtual reality headset where low latency and high quality video is essential to prevent motion sickness.
The announcement that San Jose-based Synaptics has bought DisplayLink should come as no surprise. M & A activity in the technology world remains in rude health despite the coronavirus pandemic preventing the face to face meetings that would otherwise be de rigueur in a complex international transaction such as this.
DisplayLink’s backers must have done well out of the deal, having injected $80 million over the years and we understand the company also had a policy for all employees to have share options.
Michael Hurlston, President and CEO of Synaptics, said: “Several market trends such as work from home, bring your own device and office hotelling coupled with the growing need for multiple, high resolution displays in enterprises are driving demand for universal docking and casting solutions.
“DisplayLink’s track record of success and strong market validation coupled with Synaptics’ leadership in commercial docking solutions positions us well to capitalise on these trends and deliver compelling solutions to our combined customer base.”
O’Keeffe said: “Synaptics is a recognised leader in video interface solutions and this combination creates an exciting opportunity for DisplayLink to bring greater value to our customers.
“Our video compression technology is the perfect complement to Synaptics’ current product portfolio, and the combination of our world-class engineering teams will be able to address both existing opportunities and exciting new use cases.”