It’s more than a year into the credit crisis, and the death toll is still rising.

Cadence Design Systems’ bid for rival chip design software maker Mentor Graphics has become the latest casualty, with Cadence ending its bid because financing terms were no longer attractive.

Cadence would have had to raise more than $1.1 billion in debt to pay for its $1.5 billion unsolicited offer made in June.

Mentor rejected the initial $16 per share bid as being too low. But it seems the credit crisis did not leave much room for negotiations. And the fatal blow was probably struck just a month into the offer, when Cadence lowered its financial outlook, leading analysts to question whether it could even raise the necessary funds.

The deal, of course, is only the latest to fail amid the credit crisis.

Other notable implosions include such aborted LBOs as those for racetrack operator Penn National Gaming, equipment renter United Rentals and student lender Sallie Mae.

For those hoping for a pickup in deal activity this fall, it’s the latest reminder that the crisis is not yet over.

(Graphic credit: Reuters)

PE Hub’s Dan Primack has an interview with Michael Bleyzer, CEO of Ukraine-based private equity firm SigmaBleyzer, on the impact of the Russia-Georgia conflict and investing in the former Soviet Union.

Dan: Is there much of a private equity market in Georgia?

Michael: I’m not aware of anyone activity investing there, although that doesn’t mean there is nobody. It’s a very small market with just a few real sectors for private equity. There’s some energy with hydroelectric you could do, and maybe something in food.

I went there before Saakashvilli became president, and met with the previous one. I liked the country but just couldn’t find things to do there. My general thought was that small markets on their own are difficult, and this was one with political worries as well.

Dan: You invest in Ukraine. Any worries about your business there, given the speculation that it could be where Russia goes next?

Michael: We invest not only in Ukraine, but also in Khazachstan – and all of that is going to be impacted to some extent by what’s going on. But I don’t see an immediate danger to Ukraine, because it is a much bigger country than Georgia… Its population is one-third of Russia’s. Also, Crimea is not technically a disputed area, like South Ossettia is in Georgia.

But what’s happening right now in Georgia is why I’ve never felt comfortable investing in Russia, and have never done so. I’ve got lots of friends who’ve made money there and I was tempted, but was worried that the minute I go in something like this would happen.

Dan: So you think Western PE investors in Russia are in trouble?

Michael: It’s more that they’re stuck. I’d advise them to stay away from certain sectors that are particularly vulnerable to political or oligarchic influence, and just stay beneath the radar screen. The Russian economy as a whole will do fine so long as we keep using oil and gas, and some investors will continue to make money there, but it’s a very difficult situation. Russia has a clear goal of expanding its regional sphere of influence, and is winning that fight while the U.S. and the West is losing it. That means that there could be major pressures on Western investors.

Dan: Is the reason you don’t invest in Russia more one of personal morals or one of economic interest?

Michael: It is a bit of a moral issue, but on the purely economic side I think the risk is higher than the rewards I can get there. If I can get similar returns elsewhere and have the choice, I choose not to take the risk.

The auction of the trade-magazines business of Anglo-Dutch publisher Reed Elsevier is heating up. First round bids went in a week ago and a number of private equity firms on both sides of the Atlantic are vying for the assets, which include Variety, Farmers Weekly and New Scientist.

The list of private equity names interested includes Candover, Cinven, TPG, Bain, Providence, Advent and Quadrangle, according to sources who spoke to Reuters. Some of those have teamed up, such as Candover and Cinven, one source said.

The Daily Telegraph reports that up to 12 bidders submitted first-round offers for the business, valued at between 1billion and 1.25 billion sterling. That paper reports that strategic bidders interested include U.S. publishing firm McGraw Hill, which it says teamed up with Advent and Quadrangle. Nielsen is also understood to have shown interest, the paper reported. The Telegraph also said TPG teamed up with DLJ Merchant Banking, the private equity arm of Credit Suisse.

It would be a decent sized deal for a private equity firm to buy in this drought of opportunities. Reed, which put the asset on the block to reduce its exposure to cyclical advertising spending, also said last month there was a lot of interest in the unit.

(Additional reporting by Eleanor Wason in London)

(Picture from Reed’s website)

The Russia-Georgia conflict might cast a pall over Russia’s increasing importance as both a source and destination for foreign investment, writes the New York Times’ DealBook.

One of the few brights spots in the world of leveraged buyouts this has been energy, according to DealJournal. But most of that activity takes places outside of the US, where energy deals are down significantly, though not as much as overall buyouts.

Investors have begun pulling money out of emerging markets, benefiting U.S. equity and bond funds, as commodities such as oil weaken, according to date from EPFR, writes the Financial Times’ Alphaville.

OTHER DEALS OF THE DAY
** Prokom Investments, Polish tycoon Ryszard Krauze’s investment vehicle, will sell insulin producer Bioton to a subsidiary of drugs maker Polpharma for 450 million zlotys ($202.7 million), Bioton said.

** German car parts maker Continental is prepared to drop opposition to hostile bidder Schaeffler and accept the ball-bearings maker as its controlling shareholder in an agreement that could be announced early next week.

TXU may be out of mind, but its not out of sight. The energy giant, bought by KKR, TPG and Goldman Sachs for $31.8 billion during the private equity boom, is now called Energy Future Holdings, and still reports earnings on a quarterly basis.

Second quarter results released last night, show a net loss of $3.3 billion, the vast majority of which was due to unrealized mark-to-market losses on forward natural gas positions. That’s similar to other firms in its sector — NRG which is the second largest generating company in Texas behind Energy Future — reported mark to market losses of $543 million in the second quarter. The recent rise in current natural gas prices affected many firms in the sector, such as NRG.

In most cases, its hard to work out how private equity portfolio companies are faring, unless they have publicly traded debt.

The other way of getting visibility into how these firms are doing is if they’re part of a publicly traded private equity firm, such as Blackstone.

Blackstone adjusts the value of its investments every quarter for accounting purposes, which hits it particularly hard when the market is down and highlights the companies not doing well. KKR will also be subject to public scrutiny later this year when it lists on the NYSE, and one of the companies with the most interest given its size and the volatile commodities market will likely be Energy Futures.