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For the most part, the Cadence Design Systems (NASDAQ: CDNS) unsolicited offer for Mentor Graphics (NASDAQ: MENT) was a smart move (both companies are leaders in semiconductor design software). This transaction would be a critical part of consolidation in the industry.
However, on Friday, Cadence decided to drop its $1.6 billion bid. As a result, the shares of Mentor plunged 25%.
What happened here? Well, according to Cadence, it looks like the board of Mentor didn't want to open its books (although, Mentor disputes this). Another issue is antitrust. Oh, and with the credit crunch, it's still pretty tough getting financing.
Perhaps the big problem is the slowing economy, which is putting pressure on the semiconductor industry. After all, Cadence posted weak Q2 results, and the outlook looks dismal.
Whatever the reasons, Wall Street likes the result. On the news, Cadence's share increased 6.7%.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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