August 15 was not supposed to turn out the way it did, if you were a member of the Mentor Graphics executive team.
Ever since Cadence Design Systems' public offer to acquire it for $16.00 a share, Mentor had been busy doing due diligence and building a constructive response to the unsolicited offer. At the end of June it retained both Goldman Sachs and Merrill Lynch to advise them on financial matters. Then it did what any rational company would do: it made sure that its key employees would have financial security in case of a takeover and re-organization (read layoffs).
When it thought it was ready, it told Cadence it was ready for those face-to-face talks that Cadence executives desired. The first direct discussion between Cadence and Mentor on the subject of the proposed acquisition was scheduled for August 15.
Instead, Cadence issued a press release stating that it was abandoning the effort to acquire Mentor Graphics. So much for all the work. That Mentor was taken by surprise and that it was somewhat disappointed by the news can be seen in the following sentence taken directly from their press release "Mentor Graphics notes that this withdrawal is inconsistent with both Cadence's recent public statements and recent communications between Mentor Graphics and Cadence." But, should a new suitor materialize, Mentor is ready and the bottom offering price will have to be $16.00 a share, so not all is lost.
What Cadence said and did
The public trip from "we want you because it makes sense," to "we are not interested," required very little time. In fact, things went very wrong for Cadence in the last sixty days.
On June 17, the day after the public announcement, I wrote that there would be significant anti-trust issues raised about the proposed acquisition. During the ensuing weeks Cadence continued to say that it was working with the Federal Trade Commission (FTC) and that it expected a quick approval since it saw no "restraint of trade" issues in its plan.
Cadence also stated that it had lined up financing sources for the deal and that the deal itself was not dependent on obtaining said financing. I always found the two statements a bit puzzling. On the one hand you are working to obtain financing before you finalize the deal, but on the other hand you do not need such financing. What the second statement really meant was: we believe we can obtain financing for the deal on terms that are favorable to Cadence, and thus the deal makes sense from a financial point of view.