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Microsemi assumes debt for acquisitions, pays down debt via cash flow
By Devika Patel
Knoxville, Tenn., Nov. 30 – Microsemi Corp. will keep taking on debt, then using cash flow to pay down the borrowings used in acquisitions, management says.
The company has reduced its debt to EBITDA ratio to 2.9x from 4.5x since January 2016.
“We’ve used debt to do most of our acquisitions,” senior vice president of corporate development Robert C. Adams said at the Credit Suisse 21st Annual Technology, Media & Telecom Conference in Scottsdale, Ariz., on Thursday.
“Each time, we’ve levered up and we’ve generally tended to have a bigger appetite with each acquisition.
“You see us focused on driving cash flow and paying that down,” Adams said.
The company has gone from being 4.5x levered in early 2016 to a 2.9x debt to EBITDA ratio last quarter, and the numbers are expected to continue to fall.
“When we acquired PNC Sierra in January of 2016, we were levered 4.5 turns,” Adams said.
“We drove that down to 2.9 turns, the debt to EBITDA ratio, last quarter.
“It’s a number we expect to continue to go down, but we’re very comfortable levering to buy companies, driving cash flow, paying it down,” Adams said.
The company is able to generate cash flow and keeps about $150 million of cash on the balance sheet for operations, with the remaining cash used to address debt.
“We have the ability or the opportunity to drive a strong cash flow, which we have done,” Adams said.
“We like to keep about $150 million of cash on hand for operations, otherwise our cash is better spent reducing leverage, lowering our debt to EBITDA ratio,” he said.
Microsemi is an Aliso Viejo, Calif.-based provider of semiconductor solutions.
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