1. 1
Texas Instruments’ Acquisition of
National Semiconductor

2. 2
Agenda
About the
Companies
Industry
Analysis
Transaction
Details
Pros and
Cons of the
Deal
Valuation
(Relative
and DCF)
The
Synergies
Involved
Integration
procedures
How have
the
synergies
evolved?

3. About the Companies
An American company that designs and
makes semiconductors, which it sells to electronics
designers and manufacturers globally
3rd largest manufacturer of semiconductors
worldwide, the 2nd largest supplier of chips
for cellular handsets, and the largest producer
of Digital Signal Processors (DSPs)
and analog semiconductors
Revenue: USD 12.82 billion (2012)
After the acquisition of National Semiconductor in
2011, TI became the world’s largest maker of
analog technology components
It was an American semiconductor manufacturer,
that specialized in analog devices and subsystems
Their products included power management
circuits, display drivers, audio & operational
amplifiers, and communication interface products
Revenue: USD 1.42 billion (2010)
National's key markets included wireless handsets,
displays and a variety of broad electronics markets,
including medical, automotive, industrial and test &
measurement applications
In September, 2011, the company formally became
a part of Texas Instruments as the "Silicon Valley"
division
3

4. 4
Analog Industry Analysis (2010)
 Within the semiconductor industry, the analog segment had been remarkably profitable and stable till 2010
 The analog sector, though maturing, was on the verge of significant changes, based on existent supply and
demand. New competitors were expected in the segment as demand continued to heat up and diversified
across segments and applications simultaneously, and shortages increased in duration and further tightened
the marketplace while increasing revenue opportunities
•Projection of the analog segment to grow twice as fast as the semiconductor market
(2010-14)Strong Growth
•Analog players exhibit gross margins of 40 to 70% — generally higher than margins
obtained in the digital segment (lower capex)Healthy Margins
•The heterogeneity of products, process technologies and applications creates
opportunities for various companies and prevents an oligopoly
Opportunities for
various companies
•Market share for most analog players had remained relatively constant over the last
decade (2000-10)Stability in the industry
•Several industry players were in the process of establishing capacity of 300 mm
wafers, which would lead to a 20-30% reduction in front-end manufacturing costs
Transition from 200 mm
to 300 mm wafers
Evaluation of the Analog subsector Source: ‘Will analog be as good tomorrow as it was
yesterday?’ (2010) by Mahindroo, Rosensweig and Wiseman

5.  On 4th April, 2011, Texas
Instruments Inc. (TI) agreed to
acquire its rival National
Semiconductor Corp. (NSM) for
USD 6.5 billion in cash
 The deal united two of the most
venerable names in the industry at
the time
 TI agreed to pay USD 25 for each
share of National Semiconductor, a
hefty premium of 78% over NSM’s
closing price of USD 14.07 the
previous day
 The purchase was funded with a
combination of existing cash
balances of USD 3.07 billion and
newly issued debt
 Morgan Stanley provided USD 2.5
billion in a bridge loan to TI
About the Transaction
5
NSM: $14.07
to $24.45
(74%)
TI: $36.63 to
$34.11 (1.5%)
Stock Price Movement on the day of the deal Announcement
4th April,
2011 – Deal
announced
23rd
September,
2011 – Deal
closed
Important Dates

6. 6
Pros and Cons of the Deal before the Announcement
 TI would reverse its sales slump and profit from
NSM’s higher margins
 The deal reaffirmed TI’s commitment to analog
chips (NSM’s specialty). With NSM, TI could now add
new analog products faster than it could on its own
 TI would get the opportunity to boost National’s
revenue by deploying its highly motivated sales
force
 TI would get to add about 12,000 new products to
its portfolio along with seasoned, scarce analog
engineers and reach new markets
 TI would put to good use the USD 3 billion surplus
cash on its balance sheet. Surplus cash was
generating very meager returns at the time
 Since TI would be tapping the investment market for
financing at a time of low interest rates, it would
result in rapid, strong returns on the investment
 NSM’s sales had been declining for the
past 4 fiscal years, presenting a major
challenge for TI. NSM was a struggling
rival, with less than USD 1.5 billion in
annual sales
 A 78% premium seemed way too
much, according to several analysts
 The transaction would increase TI’s
market leverage and attract regulatory
scrutiny
 TI, a zero-debt company, would be
taking on debt to finance the deal
 Integration of NSM personnel into TI
posed a challenge
The Advantages The Disadvantages and Challenges
As the various benefits to TI outweighed
the disadvantages and challenges, TI went
ahead and announced its acquisition of
NSM on 5th April, 2011

7. 7
Valuation of National Semiconductor (1 of 2)
2010 Gross
Margin
2010 Operating Margin 2010 Growth
3/31/2011
Market Cap
P/E (ttm) P/S (ttm)
National Semiconductor 69% 30% 27% 3.50 11.30 2.30
Linear Tech 78% 52% 61% 7.60 15.40 5.30
ADI 66% 35% 35% 11.80 14.80 4.10
Maxim 61% 26% 40% 7.60 31.20 3.30
Average (Linear Tech., ADI, Maxim) 68% 38% 42% 9.00 20.47 4.23
National Semiconductor at Offer Price 6.50 20.00 4.10
Relative Valuation
 Linear Tech: A member of the S&P 500, has been designing, manufacturing and marketing a broad
line of high performance analog integrated circuits for major companies worldwide for three
decades
 ADI: ADI or Analog, is an American multinational semiconductor company specializing in data
conversion, and is a leading manufacturer of analog, mixed-signal and digital signal processing
integrated circuits (ICs)
 Maxim: Maxim Integrated is an American, publicly traded company that designs, manufactures,
and sells analog and mixed-signal semiconductor products
Peers Chosen
The Valuation of National Semiconductor done (on the basis of Relative Valuation) was almost 2 times NSM’s
multiples, but very similar to the industry averages

8. 8
Valuation of National Semiconductor (2 of 2)
Cost of Equity
Risk free Rate Assumption 4.30%
Fundamental Beta 1.29
Estimated Equity Risk Premium 6.50%
Cost of Equity 12.685%
After-tax Cost of Debt
Risk free Rate Assumption 4.30%
Synthetic Credit Spread NA
Cost of Debt Assumption NA
Tax Rate Assumption 23.00%
After-tax Cost of Debt 13.09%
Cost of Preferred Stock
Preferred Dividends 0
Value of Preferred Stock 0
Cost of Preferred Stock 0
Capital Structure
Weight of Equity 37.85%
Weight of Debt 62.15%
Weight of Preferred Stock 0%
WACC 12.94%
(All values in million USD except per share price)
Intrinsic Value of Capital 3743.10
Intrinsic Value of Common Stock 3467.46
Diluted Shares Outstanding 235.10
Intrinsic Value of Common Stock (per share) 14.75
DCF Valuation
RR 0.810
ROIC 58.90%
g1 47.71%
g2 36.56%
g3 25.40%
g4 14.25%
Perpetual growth rate, g5 3.10%
(Million USD)
FCFF(i) or Terminal
Value
PV at 12.94%
FCFE (i) or Terminal
Value
PV at
12.685%
Period 1 207.36 183.61 160.93 142.81
Period 2 283.17 222.01 236.73 186.44
Period 3 355.10 246.52 308.67 215.72
Period 4 405.71 249.39 359.28 222.83
Period 5 418.29 227.67 371.86 204.67
Terminal Value 4802.47 2613.90 4533.14 2494.99
WACC = 12.94%
Cost of Equity = 12.685%
Perpetual growth rate = 3.1%
Price
Offered:
$25.00
Intrinsic
Value of
NSM:
$14.75
Market
Price of
NSM:
$14.07
Premium paid over the Market Price: 77.68%
Premium paid over the Intrinsic Value: 69.49%

9. 2010 Data TI NSM TI + NSM
Revenue USD 13.97 bn USD 1.56 billion USD 15.53 billion
Gross Margin 53.6% 69.0% 55.2%
R&D as a % of Revenue 11.2% 17.9% 11.9%
SG&A as a % of Revenue 10.9% 19.3% 11.7%
Operating Profit USD 4.51 billion USD 0.47 billion USD 4.98 billion
Operating Margin 32.3% 29.8% 32.1%
EPS USD 2.62 USD 1.25 USD 2.91
Cash flow from Operations USD 3.82 billion USD 0.41 billion USD 4.23 billion
9
The Synergies Involved (1 of 3)
 Visible increase in Revenue, Gross Margin, Operating Profit and EPS when the firms
combine
 The combined Return on Invested Capital (ROIC) would exceed TI’s cost of capital within
3 or 4 years
Financial Synergies
Source: Texas Instruments’ investor presentation (2010)

10. 10
The Synergies Involved (2 of 3)
Operational Synergies
43%
15%
9%
12%
21%
TI Revenue = USD 13.97 billion (2010)
Analog
Embedded
Processing
Wireless
Baseband
Other
49%
13%
8%
11%
19%
TI + NSM Revenue = USD 15.53 billion (2010)
Analog
Embedded
Processing
Wireless
Baseband
Other
 The deal accelerates TI’s transformation into a firm focussed on Analog, Embedded Processing
and Wireless technologies
 The core business of National Semiconductor (Analog) easily aligns with TI’s increasing focus on
Analog
 The core business (Analog + Embedded Processing + Wireless) would contribute to over 70% of
the total revenue (as of 2010)
 NSM’s industrial strength would also complement TI’s
Source: Texas Instruments’ investor presentation (2010)

11. 11
The Synergies Involved (3 of 3)
The Strategic Rationale
 National Semiconductor’s (NSM’s) 12,000 analog products would add to Texas Instruments’
(TI’s) current portfolio of 30,000 analog products, making the combined firm to have a
market share of 17% (increase of 3%) in the global vast and fragmented analog market
 National's power control chips and the customers for those products will be a welcome
addition to the TI product line and customer base
 TI, with its large sales organization, aims to remedy NSM’s current insufficient ability of
merchandizing its products. NSM’s products would get more sales throughput
 The acquisition brought out the world’s first 300 mm analog factory. The factory is equipped
with larger wafers and tighter process geometries, which brought about important cost
savings
 The timing of the deal was perfect because of the state of the semiconductor business and
financial markets in 2011
 Semiconductor manufacturers like TI were in a good cash position, and TI was using this surplus cash to
expand its manufacturing capacity
 Debt was also available at a cheap rate, so TI used existing cash and new debt to finance the deal
 Overall, the decision to acquire National Semiconductor was a wise decision with moderate
synergies taking advantage of the existing market scenarios

12. 12
Steps taken to ensure a Smooth Integration
 Both firms realized the importance of a
seamless integration process
 Hence, integration was a key focus for
both firms, TI and NSM
 Product Integration: The focus was not
just integration on a chip, but also
inductors, FETs, DC/DC converters and so
on
Key focus on Integration Creation of “Silicon Valley Analog”
 “Silicon Valley Analog” was created as a
4th Business Unit (BU) after the
acquisition
 This structure was designed to make the
integration of the teams as simple and
seamless as possible so that TI could
direct its energy to providing more
solutions and engaging with more
customers
Other measures taken
 Technology sharing sessions were held to foster collaboration between both firms’
engineering teams and to accelerate innovation
 If product overlap occurred, TI continued to offer both firms’ offerings, so that customers
continued to count on TI to make products as long they are technologically capable of doing
so. Obsolescence was a last resort at TI
 Both firms enjoyed similarities in cultures, so cultural integration was never a problem

13. 13
How have Synergies evolved? (1 of 2)
Financial Component Absolute Value (2012) Remarks
Analog Revenue USD 6.998 billion
Increased by USD 623 million or
10% due to the inclusion of a
full year of SVA
Goodwill USD 3.528 billion
Other Intangible assets USD 2.96 billion
Debt assumed by TI USD 1.105 billion
TI assumed outstanding debt
from NSM’s books
R&D expenses Increased by 9% in 2012
SG&A expenses Increased by 10% in 2012
Interest and debt expenses USD 42 million Put pressure on margins
Operating Profit
Operating Profit as a % of
revenue reduced from 21.8%
(2011) to 15.4% (2012)
Financial Perspective
Source: Texas Instruments’ Annual Report (2012)

14. 14
 Products acquired through the purchase included power management, data converter, interface
and operational amplifier catalog analog products, nearly all of which are complementary to TI’s
other Analog products
 After the acquisition, TI grew its free cash flow to almost USD 3 billion (23% of revenue). This was
a direct result of more revenue coming from Analog and Embedded Processing
 Ever since the acquisition was completed, TI has gained share in the Analog and Embedded
Processing markets, and they have continued to wind down their baseband operations
 Revenue from a full year’s inclusion of SVA slightly more than offset lower revenue from Wireless
baseband products
 TI now has the ability to develop their own process technologies and means that their engineers
can get access to state-of-the-art processes for developing their circuits
 TI now has the industry's largest analog design team and more than 4 million sq. feet of
manufacturing capacity
 The National acquisition has given TI a significant footprint in Silicon Valley for the first time. TI is
using this opportunity by the opening of TI Silicon Valley Labs and they have tied up with
universities (Stanford, Berkeley) to further strengthen key engineering undergraduate programs.
 TI’s management has been blown away by the innovative thinking and the kinds of technology
that SVA has been developing
Strategic Perspective
How have Synergies evolved? (2 of 2)

15. 15
Important References
 Texas Instruments’ Annual Report, 2012
 Texas Instruments’ Investor Presentation, 2010
 National Semiconductor’s Annual Report, 2010
 ‘Will analog be as good tomorrow as it was yesterday?’ (2010) by Mahindroo, Rosensweig and
Wiseman
 http://investor.ti.com/releasedetail.cfm?ReleaseID=607786
 Objective Analysis: Semi-Conductor Market Research
 http://en.wikipedia.org/wiki/Texas_Instruments
 http://en.wikipedia.org/wiki/National_Semiconductor
 http://online.wsj.com/article/SB10001424052748703712504576243133367045662.html
 http://www.eetimes.com/document.asp?doc_id=1279562
 http://www.eetimes.com/document.asp?doc_id=1259147
 http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/electronics/842
8440/Texas-Instruments-to-buy-National-Semiconductor-for-6.5bn.html
 http://www.analog-eetimes.com/en/ti-s-integration-strategy-for-national-semiconductor-devices-
begins-to-take-shape.html?cmp_id=7&news_id=222902839

16. 16
Texas Instruments’ Acquisition of
National Semiconductor
Thank You!