Avago/Broadcom. KKR and Silver Lake''s $2.6B carve-out that built a $250B semi giant
A 2005 Agilent spin-out that became Hock Tan''s acquisition vehicle for the entire chip industry
The deal. In December 2005, KKR and Silver Lake Partners bought Avago Technologies from Agilent (itself a spin-off of HP) for $2.6 billion. Avago was Agilent's semiconductor business, focused on optoelectronics, RF (radio frequency), and storage chips. The deal was structured with significant debt and equity from both PE firms.
The thesis. Avago had strong intellectual property in specialized semiconductor segments but had been managed inside a broader instruments parent that didn't understand chips. The thesis was operational improvement plus strategic positioning for either IPO or strategic sale. KKR and Silver Lake also believed the chip industry was entering a consolidation phase that would reward scaled players.
What they did. They installed Hock Tan as CEO in 2006. A relatively unknown semiconductor executive who would become one of the most accomplished M&A executives in history. Tan immediately began aggressive operational discipline (Avago had legendary cost focus). They IPO'd in August 2009 at $1.4B market cap. Then began the transformation: Avago acquired LSI for $6.6B in 2014, then the original Broadcom for $37B in 2015 (and renamed itself Broadcom). Subsequent acquisitions: Brocade ($5.9B, 2017), CA Technologies ($18.9B, 2018), Symantec's enterprise security business ($10.7B, 2019), and VMware ($69B, 2023).
The outcome. Broadcom (NASDAQ: AVGO) is now one of the world's largest semiconductor and software companies with $250B+ market cap as of 2024. KKR and Silver Lake fully exited their original positions years ago at multi-billion-dollar profits. But the more remarkable story is the platform they enabled. Hock Tan's acquisition strategy created tens of billions of dollars in shareholder value over 15+ years.
Best practices for VantageOS users. First, the right CEO can take a modest PE deal and turn it into an industry-defining platform. Hock Tan was a relative unknown when KKR hired him; his subsequent track record was extraordinary. Be willing to bet on under-the-radar operators with the right combination of discipline and ambition. Second, semi-conductor and other industries with consolidation tailwinds reward platform builders. The same operational team can successfully integrate 5-10 deals if the M&A muscle is deliberately built. Third, PE exits are not endpoints. The strongest PE-built platforms continue to compound for decades after the original owners exit, which means the original owners can leave significant value on the table by selling early. Consider partial exits and continued board involvement for platforms with ongoing acquisition runway.