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  • September 15, 2020

The roughly $40 billion sale of Arm to Nvidia is one of the biggest tech deals of the year, and completes the transformation of SoftBank from a tech owner and operator into a risk-taking investor. Here’s how it came together, which DealBook’s Michael de la Merced pieced together from interviews with sources familiar with the talks.

Selling Arm to Nvidia was on SoftBank’s mind when the tech conglomerate began thinking about options for the chip designer in March. Putting Arm and Nvidia together, executives believed, would create a dominant force in the computer chip industry, combining Arm’s designs for chips that power smartphones — and soon, Macs — and Nvidia’s graphics chips, which are mainstays of cloud computing and A.I. applications. (Of course, antitrust regulators and Arm customers like Apple will scrutinize the deal, so its contours may change.)

SoftBank executives approached Nvidia in April, relying on a relationship they had built with the chip-maker’s founder and C.E.O., Jensen Huang, during a previous investment in his company. The next month, Nvidia said it wanted to proceed with what would be the biggest semiconductor deal on record.

Suggestions of a potential I.P.O. of Arm were a red herring. One of the people with knowledge of the talks described them as a way to maintain negotiating leverage with Nvidia. Meanwhile, the deal talks were restricted to a small group of executives: For SoftBank, that included Masa Son, its founder, and the executives Akshay Naheta and Spencer Collins; at Nvidia, that group included Mr. Huang and its C.F.O., Colette Kress.

A handful of banks worked on certain aspects of the transaction. SoftBank hired the boutique banks Zaoui Company and Raine Group, as well as Goldman Sachs, while Nvidia used Morgan Stanley. But the key negotiations were handled by company executives over video calls.

By SoftBank’s own reckoning, the deal was good — but not yet a home run. Executives have argued that the Arm deal fetched a “good” price, not a high one. (Excluding earnouts and a stock payment to Arm employees, SoftBank is taking home $33.5 billion to start, versus the $32 billion it paid for Arm in the first place.)

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