CDNS-MENT marriage good for LAVA

Today, Cadence (CDNS) went public with its' unsolicited offer to buy Mentor Graphics (MENT) for $16 a share valuing the 27 year old company at around $1.6 billion. Whether the acquisition would be good for CDNS/MENT shareholders is an issue to debate in a separate post, here's why I think this deal would be good for Magma Design (LAVA):

1. This further consolidates the already concentrated EDA market, which will help LAVA as it will be recognized as the third biggest EDA vendor.
2. Chip design companies already suffering because of low competition in the industry would be more inclined to keep LAVA in business - Would result in more business and dollars for LAVA.
3. It reduces competition for LAVA (and SNPS) in the Design Implementation space - MENT recently acquired Sierra Design to enter this market and if acquired by Cadence, the Sierra suite would overlap with Cadence's Design Implementation Platform, which would force the company to get rid of one of the tools, further benefiting LAVA.
4. Cadence does not have a very good history of integrating acquisitions - Going by its' history of past acquisitions, it may very well loose Mentor's strong foothold in the Physical Verification space, further benefiting Magma's suffering Mojave physical verification suite.


With the announcement, MENT is up over 23%, CDNS is down 6% and LAVA is up 6%.

Disclosure: Long LAVA