Siemens nears deal to buy Mentor Graphics at a 21% premium

[Daniel Nenni]

Well, it looks like I'm wrong again. Not about Mentor being acquired, I was right on that, but I did not see Siemens as the likely suitor. ANSYS was my pick but I also heard that a Chinese PE firm was in the hunt as well as Dassault. In my opinion this is a great move by Mentor! BRAVO!!!! EDA just got a whole lot more interesting!

Siemens to buy Mentor Graphics - Business Insider

SAN FRANCISCO, Nov 13 (Reuters) - Siemens AG, Europe's biggest industrial group, is nearing a deal to buy Mentor Graphics Corp, which makes software for designing semiconductors, for $4.5 billion to $4.6 billion in cash, according to people familiar with the matter.

The deal could be announced as soon as Monday, according to the sources, who requested anonymity because it had not yet been made public.

Siemens and Mentor Graphics could not immediately be reached for comment.

The acquisition will help Siemens expand its software capabilities, which it has been shoring up in recent years. It bought CD-adapco, a privately held U.S. engineering software firm, earlier this year.

Since taking over Siemens as chief executive, former finance chief Joe Kaeser has set out to reshape the German company and make it more profitable and less cumbersome by selling off non-core units.

 

[Daniel Payne]

I'll be the first on record to say that this is a really bad idea, because of the following reasons:

• Siemens has very little understanding of the EDA marketplace as a software vendor, therefore they have little to offer our industry in terms of vision or strategy
• Culture clash - I'm pretty certain that German executives at Siemens are not in synch with the Oregon and California way of running a software company, therefore expect plenty of arguments and an exodus of management and engineering talent from Mentor as a result
• There is little synergy between Siemens and Mentor Graphics products, so why do such a deal?
• Yes, Siemens is a major user of Mentor Graphics tools, but that doesn't mean that Siemens will know how to wisely manage Mentor Graphics as a company
• Goodbye Wally Rhines, Greg Hinckley and most of the Mentor executive team, unless Siemens allows Mentor to operate as a subsidiary

 

[Daniel Nenni]

I'll be the first on record to say that this is a really bad idea, because of the following reasons:

• Siemens has very little understanding of the EDA marketplace as a software vendor, therefore they have little to offer our industry in terms of vision or strategy
• Culture clash - I'm pretty certain that German executives at Siemens are not in synch with the Oregon and California way of running a software company, therefore expect plenty of arguments and an exodus of management and engineering talent from Mentor as a result
• There is little synergy between Siemens and Mentor Graphics products, so why do such a deal?
• Yes, Siemens is a major user of Mentor Graphics tools, but that doesn't mean that Siemens will know how to wisely manage Mentor Graphics as a company
• Goodbye Wally Rhines, Greg Hinckley and most of the Mentor executive team, unless Siemens allows Mentor to operate as a subsidiary

I'm confidant that Mentor will in fact be a subsidiary of Infineon.

Being the #3 EDA company is no way to spend your day. This disruptive move will get Mentor back in the game, absolutely. Hopefully they will be much more aggressive in the acquisition business because there are some very successful emerging EDA companies that will challenge Synopsys and Cadence with the right amount of backing. ClioSoft, Methodics, Solido, Runtime DA, Fractal, just to name a few. And hopefully Mentor will get back into the IP business. And how about a services company like eSilicon, VeriSilicon, or Open Silicon? That would be spectacular! I'm seriously giddy over this one...

 

[yanfeng]

Ansys merger with Mentor may make sense. It is a negative news to Mentor employees and Mentusers of Mentor tools.

 

[Daniel Payne]

Let's see how the story develops in terms of how Mentor would be run under a Siemens logo, but I just don't see the product synergy and culture alignment required to make this kind of deal grow the EDA business for Mentor. I do think that Mentor is growing their Verification IP business, so that's a positive market segment.

 

[yanfeng]

[FONT=Miller Display Roman, georgia, serif]After acquiring Mentor Graphics, it seems that REMCOM on Simen's radar.
yanfeng[/FONT]

 

[garydpdx]

My initial impressions are that MGC's software/embedded division and automotive initiative were attractive to Siemens for this buy. The hardware-oriented EDA tools are customer enablers.

 

[Bernard Murphy]

Seemsto have had a positive effect on SNPS and CDNS Synopsys, Cadence Design Systems rise subsequent Mentor Graphics takeover - Synopsys, Inc. (NASDAQ:SNPS) | Seeking Alpha

 

[mchad]

It's no secret that MENT has been for sale for years. The CDN deal and the Icahn fiasco would want been terrible. In comparison, this is not a bad deal. The execs have been there a long time, and it seems like it's finally time for a change. Looking back, I think they did a great job, rescuing MENT from the hard fall in the early 90's.

 

[Bernard Murphy]

Also a good indicator that good acquisitions in EDA these days are no longer contained to the industry. There's more value in merging into larger operations outside EDA. Ansys showed this first and I would be unsurprised to see more like this.

 

[kloty]

Just read the press release. The word EDA is not mentioned there. Siemens neither needs Tanner tools nor Calibre

 

[smeyer0028]

I think the Siemens purchase is very good for EDA. From my view point as a tool developer, the worst problem with EDA is the three large vendors activiely discourage competiition with constant law suits and disciourage investment because the only way to profit is to be purchased by one of the big 3. I think Siemens is too large to be interested in suing to reduce competition. Result of current EDA behavior is that there is very little market growth.

 

[fogh]

Just read the press release. The word EDA is not mentioned there. Siemens neither needs Tanner tools nor Calibre

software for designing semiconductors

EDA is jargon, that is why it is not in the PR. Your point is ?

If you can foresee what is to become of Calibre please shoot.

 

[Don Dingee]

Makes. Almost. Zero. Sense.

I know there's a big push on Industry 4.0 and IoT. And, this may be a sign that non-chip companies are taking our advice here and moving into chips. If viewed from the Mentor Graphics side, this may be the best deal for them out there.

I'm with Mr. Payne, however. Buying a software company does not make you a software company. Unless Siemens is completely hands off, I'd expect to see pieces start to spin out. Even if Siemens is completely hands off, I expect key personnel to leave as soon as the retention handcuffs are off.

Most importantly, this really messes up Mentor Graphics customers who aren't going to want to do business with Siemens (read: any automotive company, any industrial automation company, any medical equipment company, ...)

 

[Daniel Nenni]

Here is the official PR:

Siemens to expand its digital industrial leadership with acquisition of Mentor Graphics - Mentor Graphics

This acquisition decisively extends Siemens' leading Digital Enterprise Software portfolio with Mentor’s well established electronics IC and systems design, simulation and manufacturing solutions. These capabilities are essential for today's smart connected products such as autonomous vehicles. The combination provides mechanical, thermal, electronic and embedded software tools which will allow Siemens' customers to further accelerate their innovation, drive production efficiencies and optimize the operation of their products in the field. Now, for the first time, quality, efficiency, flexibility, safety and speed can be optimized across technical domains, throughout the entire lifecycle and for the entire extended enterprise.

 

[nemgreen]

Makes. Almost. Zero. Sense.

I know there's a big push on Industry 4.0 and IoT. And, this may be a sign that non-chip companies are taking our advice here and moving into chips. If viewed from the Mentor Graphics side, this may be the best deal for them out there.

I'm with Mr. Payne, however. Buying a software company does not make you a software company. Unless Siemens is completely hands off, I'd expect to see pieces start to spin out. Even if Siemens is completely hands off, I expect key personnel to leave as soon as the retention handcuffs are off.

Most importantly, this really messes up Mentor Graphics customers who aren't going to want to do business with Siemens (read: any automotive company, any industrial automation company, any medical equipment company, ...)

Siemens Digital Factory division (their software group) has revenues of 2.7b euro - approx 2X that of Mentor!

 

[Staf_Verhaegen]

I'm with Mr. Payne, however. Buying a software company does not make you a software company. Unless Siemens is completely hands off, I'd expect to see pieces start to spin out. Even if Siemens is completely hands off, I expect key personnel to leave as soon as the retention handcuffs are off.

Siemens has a lot of faces, people seem to forget that they are one of the reference companies in the industrial automation with their PLCs (google on Siemens S7; YMMV on results you see). So they more down into system level software, electronic system design and even chip design than most people think. It's true that the Calibre verification suite is not directly fitting in the Siemens prortfolio but the HLS much more than people realise. I do see machines with custom chips and/or FPGA acceleration perfectly falling under the Industry 4.0 hype term.

 

[Daniel Nenni]

It's no secret that MENT has been for sale for years. The CDN deal and the Icahn fiasco would want been terrible. In comparison, this is not a bad deal. The execs have been there a long time, and it seems like it's finally time for a change. Looking back, I think they did a great job, rescuing MENT from the hard fall in the early 90's.

This is a GREAT deal. Mentor is now part of an $80B+ company which puts Cadence between a rock (SNPS) and a hard place (Siemens).

Lip-Bu could follow this move by taking Cadence private. I know the China PE firms are chomping at the bit. Another seriously disruptive move would be for TSMC to buy Cadence and give the tools away for free. Just imagine the possibilities........

 

[Bernard Murphy]

Makes. Almost. Zero. Sense.

I know there's a big push on Industry 4.0 and IoT. And, this may be a sign that non-chip companies are taking our advice here and moving into chips. If viewed from the Mentor Graphics side, this may be the best deal for them out there.

I'm with Mr. Payne, however. Buying a software company does not make you a software company. Unless Siemens is completely hands off, I'd expect to see pieces start to spin out. Even if Siemens is completely hands off, I expect key personnel to leave as soon as the retention handcuffs are off.

Most importantly, this really messes up Mentor Graphics customers who aren't going to want to do business with Siemens (read: any automotive company, any industrial automation company, any medical equipment company, ...)

Have to admit I don't really get it either. Ansys acquisition of Apache made sense for power integrity etc which is close to their other business lines. Siemens website mentions no existing play in adjacent areas, so acquiring Mentor seems like only part of a strategic move? Should we be expecting more acquisitions to build a complete story?

 

[Don Dingee]

A lot of folks took umbrage at my "not a software company" remark. I'm fully aware that Siemens is a power in industrial automation, a significant player in medical imaging, and a growing power in automotive. It was correctly pointed out that Siemens software operation is bigger than Mentor as a whole. Most Siemens software is sold as part of a Siemens solution. Perhaps I should have added the word "not a merchant software company" for clarity.

I may be misinterpreting Siemens' motives here. Siemens is clearly a customer for Xpedition, Nucleus OS, embedded Linux, and the Tanner suite. If they intend to move more into chip design, hardware emulation starts to make more sense. These could all be significant enablers for an end-to-end product design center of excellence.

However, I've seen this show on a smaller scale - Emerson, another industrial automation company, purchased the Motorola Computer Group, an embedded hardware and software supplier. Long story short, it created a massive channel conflict, and a few years later the leadership bought the company back and spun it out as Artesyn.

So:

If we expect things to be business as usual, where Mentor EDA product families continue to be sold as tools (a merchant software company), I'm very bearish.

If we expect things to transform, with Mentor intellectual capital helping Siemens create products including software (an Industry 4.0 company), and we're not too worried about Mentor continuing to be an EDA supplier as they exist today, I'm more bullish.

I expect something in the middle, where some pieces are kept and some are spun out.