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 and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Cadence Design Systems Inc. (NASDAQ: CDNS) is the largest player in developing platforms for building integrated circuits. The company generates about $1.6 billion in revenues and has 5,100 employees.

Now, Cadence wants to get even bigger. Today, the company announced an unsolicited $1.6 billion bid for Mentor Graphics Corp. (NASDAQ: MENT). The offer is $16 per share.

Mentor is a big player in testing semiconductors, which should be a nice compliment to Cadence. And over the past couple months, Cadence has been trying to court Mentor.

But all advances were rejected. So why not go hostile?

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• According to the U.K. Times, Imperial Chemical Industries plc (NYSE: ICI) rejected an all-cash offer of GBP$7.2B from Dutch chemicals giant Akzo Nobel NV (NASDAQ: AKZOY), saying the proposal "significantly undervalues" the company; sources believe The Dow Chemical Company (NYSE: DOW) and Germany's BASF AG (NYSE: BF) could launch competing bids.
• BHP Billiton Limited (NYSE: BHP) is again interested in a $40B acquisition of Alcoa Inc (NYSE: AA), an aluminum producer, reported the U.K. Times.
• The New York Times reported that negotiations on a buyout of Cadence Design System Inc (NASDAQ: CDNS) by private equity firms Blackstone Group and Kohlberg Kravis Roberts appear to have stalled over price.

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• The New York Times reported that software maker Cadence Design Systems Inc (NASDAQ: CDNS) is in talks with private-equity players that include Kohlberg Kravis Roberts and the Blackstone Group about a possible sale of the company.
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