Mentor-Icahn and the Outside Acquisition of EDA
Mike Rogoway of the Portland-based Oregonian recently wrote a good summary of investor Carl Icahn’s potential reasons for increasing his market share in Mentor Graphics: Mentor Graphics rebounds, but Carl Icahn casts a shadow
In talking with Mike for his story, I began to ponder the actual possibility of an Enterprise Resource Planning (ERP) or Product Lifecycle Management (PLM) company acquiring an EDA company.
Over the last several years, many – including myself – have speculated that a PLM company or a supply chain vendor company might buy an EDA tool vendor. While special cases of the reverse have happened – consider Mentor’s recent acquisition of Valor in the PCB space – I no longer think that an outside business will acquire any EDA company.
My change in opinion came from a discussion with a business savvy expert. He pointed out that the merger of a PLM or ERP company with and EDA vendor would ultimately result in one CEO managing both companies. This would be a serious problem, since a PLM or ERP CEO would have little or no understanding of the technology or business needs of the EDA world.
As further proof of the natural break point between the two worlds, I ask this question: Can anyone remember the last time a business outside of EDA come into our chip industry to acquire an EDA company?
This doesn’t mean the EDA suppliers are in trouble, i.e., no one will acquire them. Indeed, it suggests that a natural bread point exists between EDA and PLM-ERP companies.
If you accept this reasoning, then extend it slighty to a more natural and obvious business and technology break point – namely, between hardware and software systems. Although hardware is becoming a commodity and software a differentiator, does it really make sense for hardware companies to acquire software vendors, e.g., Intel and WindRiver. Have such unions ever been successful in the past? Now there is something to think about.