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Mentor-Valor deal is history repeating.

BRINGING a flurry of recent speculation to a close, Mentor Graphics in October formally announced an agreement to acquire Valor Computer)ized Systems. According to a joint statement, the parties expect to close the deal early next quarter. To some, this is a significant deal, and rumors had been circulating for several months that it was coming. While details are still sketchy, we do know that the small group of shareholders who own a majority of Valor's stock has agreed to the deal. I've also heard that Mentor plans to position Valor as a wholly owned subsidiary. But the story is a lot more complicated than first meets the eye.

There are several tentacles to the Valor business. Known best for its assembly and DfM tools, there is also a reportedly very profitable joint venture with Orbotech (under the name Frontline) for CAM tools. So if the proposed marriage does get consummated, Mentor will become a 50% owner of the CAM business, as well as sole owner of the assembly and DfM tools.

Less certain is whether there will be regulatory issues. Valor has a dominant share of the proprietary data format market, and as of this writing, it's not clear whether regulators will see Mentor's position as one of the two major PCB EDA vendors as a potential anti-trust issue.

EDA has been down this road before. When Cadence acquired Cooper & Chyan Technology (and the latter's Specctra router) back in the '90s, the only way the FTC would approve the deal was if Cadence permitted other EDA companies to develop and to sell interfaces to Specctra (for the FTC ruling, see ftc.gov/opa/1997/O5/cadence.shtm). Again, while I'm not an attorney, nor did I play one on TV, I would bet that some pretty smart ones have looked at this with an eye to what it takes to make it happen. Count on this deal going through.

As for why, I've scratched my head until I created a sore spot trying to figure this out (Mentor and Valor aren't commenting until the deal goes through). I finally asked my guru, Maharishi Woteub Ekim, to spell it out for me. After I rendered the requisite offering of paper embedded with exotic threads, inks and laser-etched holograms, he returned with an answer. Silly acolyte, he said, most EDA players still active in the PCB space have been integrators. They find a complementary product and buy the company to fill the weak areas in their stable. In this case, the most righteous and wise one informed me, it not only gives Mentor a more complete suite of tools, but more important, it gives them a new and better access to the manufacturing world, especially assembly. Do not be surprised, the enlightened one told me, if at some point, Mentor integrates certain parts of Valor's tool set and sells the rest.

Of course, other EDA tools suppliers have their own way of looking at this. One of the people I spoke with after the deal was announced was EMA Design Automation President Manny Marcano, a leading Valor reseller. While EMA is also a Cadence VAR (and thus a Mentor competitor), Manny told me that he did not see this deal affecting his relationship with Valor. He also sees Valor being set up as a wholly-owned subsidiary at least for the foreseeable future. I had another reason for talking to Manny. I heard stories at PCB West that Cadence was jerking its PCB tools out from under EMA. Manny set the record straight by assuring me that the relationship with Cadence remains strong and that EMA continues to sell Cadence's Allegro and OrCAD PCB system tools. Along with the deal EMA signed to distribute Aldec's Active HDL, Manny sees the Active-HDL integration with OrCAD as a big plus in the mission to cover design from front to back.

Just as I was writing this, I received a press release from Intercept Technologies. Its response to the Mentor/Valor announcement is to offer users free, limited time access to its artwork and manufacturing verification in Pantheon. Intercept has always been big on the manufacturing side of PCB design, and although it may not be as big a player as Mentor or Cadence, it has been in this market since 1983, which tells me they must be doing something right.

All this takes me back to what I said last month: Some things never change. And once you start thinking things are getting a little slow, along comes an acquisition with the potential to shake up everything.

P.S. To keep up with other thoughts and ramblings, check out my blog at pcdandf.
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Title Annotation:DATABASE
Author:Waddell, Pete
Publication:Printed Circuit Design & Fab
Date:Nov 1, 2009
Words:780
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