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Thread: Who would buy Cadence?

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    Admin Daniel Nenni's Avatar
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    Who would buy Cadence?

    I had a feeling Mentor Graphics would be purchased but when I made a list of possible acquirers Siemens was not on it. Same goes for ARM and SoftBank. So the $2B question is: Who would acquire Cadence?

    A gentleman on Seeking Alpha is suggesting Cadence is next and here is his rational:

    Acquisition Target
    CDNS has partnership relationships with companies that it also competes with. I believe that one of these companies is a likely acquirer as the transaction would result in being accretive to earnings through cost reduction and end a bipolar relationship.

    CDNS is one of only two major remaining players in the EDA arena and commands a higher multiple than Mentor Graphics which was acquired at a 21% premium to its market price. Mentor's products are considered lower quality than Cadence's, and Mentor Graphics did not dominate any market sector as does CDNS.

    What makes CDNS an attractive acquisition is not only its market presence but also its strong cash flow generation. CDNS reported $693 million in cash and investments as of the end of the calendar year with free cash flow of $471 million for the fiscal year. The chart below illustrates the extended free cash flow rise.

    80% of the cash is overseas. The new tax laws make for a compelling case that the funds may be used in the U.S. as almost half of the semiconductor companies surveyed by KMPG responded that they are most optimistic about business in the U.S


    Cadence Design Systems: Good Bet On Earnings Or Buyout - Cadence Design Systems, Inc. (NASDAQ:CDNS) | Seeking Alpha

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    Blogger Daniel Payne's Avatar
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    The seeking alpha guy is off base on a few conclusions:

    • CDNS would not be acquired by SNPS because of product overlap, but maybe ANSS or Dassault
    • Mentor's product quality is not lower than Cadence
    • Mentor does dominate in a few markets: Calibre, Questa for VHDL, PCB tools

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    Intel ?
    thought provoked by April.1 post.

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    Admin Daniel Nenni's Avatar
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    Quote Originally Posted by Daniel Payne View Post
    The seeking alpha guy is off base on a few conclusions:

    • CDNS would not be acquired by SNPS because of product overlap, but maybe ANSS or Dassault
    • Mentor's product quality is not lower than Cadence
    • Mentor does dominate in a few markets: Calibre, Questa for VHDL, PCB tools
    My bet would have been China money but that is less likely now. Dassault would be the most logical. They were one of the bidders for Mentor.

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    Blogger Daniel Payne's Avatar
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    Yes, Dassault has made sense as an acquiring company for many years now.

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    Blogger Bernard Murphy's Avatar
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    I also heard China from another source who freely admitted they were speculating

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    Quote Originally Posted by Daniel Payne View Post
    The seeking alpha guy is off base on a few conclusions:

    • Mentor's product quality is not lower than Cadence
    • Mentor does dominate in a few markets: Calibre, Questa for VHDL, PCB tools
    Product quality: to my mind, AFS is still the best simulator, and Calibre is clearly the "gold standard" for layout checking. I can't speak to the other products or product interworkability, as it is a very long time since I have use Mentor.
    Unfortunately, today's product quality does not necessarily equate to dominance - history and external environment are also crucial. For example, I personally utterly detest Cadence's schematic entry tool, and see little if any specific advantage to any of their individual tools; nevertheless, my small company is almost entirely Cadence-based. Why? Because (other than Calibre) every foundry supports Cadence ahead of, and we only ever do one or two designs in any process. The overhead (effort and delay) of transferring even the models is insupportable for us, and this is before we even consider LVS.

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    Admin Daniel Nenni's Avatar
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    Quote Originally Posted by George Storm View Post
    Product quality: to my mind, AFS is still the best simulator, and Calibre is clearly the "gold standard" for layout checking. I can't speak to the other products or product interworkability, as it is a very long time since I have use Mentor.
    Unfortunately, today's product quality does not necessarily equate to dominance - history and external environment are also crucial. For example, I personally utterly detest Cadence's schematic entry tool, and see little if any specific advantage to any of their individual tools; nevertheless, my small company is almost entirely Cadence-based. Why? Because (other than Calibre) every foundry supports Cadence ahead of, and we only ever do one or two designs in any process. The overhead (effort and delay) of transferring even the models is insupportable for us, and this is before we even consider LVS.
    Thus the problem with Seeking Alpha, they have zero experience in the field they are writing about. Another option would be to take Cadence private. That has also been discussed before. The Siemens acquisition of Mentor really was disruptive and I think we will be feeling thee ripples for some time. Synopsys sure has stepped up acquisitions and I'm guessing Cadence is gearing up for something big otherwise they will be 3rd fiddle. I would never bet against Lip-Bu Tan.

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