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The Negotiation Strategy Of Intel

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Negotiation Strategy
The negotiation of this deal will be driven by the expected synergies of the two companies. These include acquiring new technologies, maximizing the utilization of Intel’s factories, and gaining market share. Intel needs to be aggressive with their offer prices because of the recent influx mergers and acquisitions activity in the semiconductor industry. They do not have a first mover advantage and therefore must offer a premium over Altera’s current stock price valuation. Acquisition will be done on a cash basis, with Altera shareholders receiving approximately $64 per share. Intel will finance the acquisition with cash and new debt. Altera’s current free cash flows of $1,071,430 should cover any interest expense assumed by Intel with the acquisition of new debt.
This acquisition will result in a horizontal integration, as Intel is acquiring complementary production outputs. In the post-closing organization, Altera will become an integrated business unit within Intel. They will retain their engineers and sales force under long-term contingency plans. This means that Altera will no longer have their own stock; only Intel stock will be offered in the market. Furthermore, Altera will continue to manufacture their existing product line under Intel and will work with Intel’s engineers to create new innovative products.
The negotiation will highlight the benefits to Altera. First, with this acquisition, Altera will gain exposure to manufacturing leadership.

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