KKR scores with Avago IPO

Posted Aug 6th 2009 3:30PM by Tom Taulli
Filed under: Hewlett-Packard (HPQ), Private Equity

Avago has a rich history, going back more than 40 years. In fact, the roots of the company come from Hewlett-Packard (NYSE: HPQ).

Yesterday, Avago has set a new chapter in its history; that is, a public offering. The company issued 43.2 million shares at $15 each, which was at the top of it $13-$15 range. What's more, Avago was able to sell 7.2 million more shares than expected.

Avago develops analog semiconductor devices, with a portfolio of roughly 6,500 products. The target markets include diverse areas like wired infrastructure, industrial/automotive electronics, wireless communications and even computing peripherals. Yes, Avago's solutions are certainly ubiquitous.

As a testament to its technology, the company has amassed a portfolio of over 5,000 US and foreign patents. There are also about 1,000 analog design engineers on staff.

But Avago nonetheless has maintained a laser focus on keeping down costs, especially over the past few years. After all, the company has two private equity sponsors, KKR and Silver Lake Partners.

For example, Avago has aggressively cut head count and has found considerable efficiencies in its supply chain. So, if it makes sense to outsource things, the company will do so.

For the year ended May 3, 2009, Avago posted $1.699 billion in revenues. There are approximately 40,000 customers.
Finally, this IPO is a big achievement for KKR. The firm is moving into new areas – such as underwriting – and also wants to be a public company itself. What's more, KKR needs to get returns for its investors. So far, Avago is a good start.

Tom Taulli is the author of various books, including The IPO Primer and The Complete M&A Handbook.

Tags: Avago, IPOs, KKR