Synopsys, known primarily for electronic design automation tools used by the semiconductor industry, is acquiring Ansys, a maker of complementary simulation and analysis software, for $35 billion, marking the first really big chip sector deal of 2024.
The terms of the deal call for Ansys shareholders to receive $197 in cash and 0.3450 shares of Synopsys common stock for each Ansys share they own at per-share implied value of $390.19.
The announcement does not come completely out of the blue, as Reuters reported last month that the two companies–longtime strategic partners–were in talks about an acquisition. But the timing may have surprised some coming so soon after Synopsys Founder Aart de Geus stepped down from his CEO post on Jan. 1, handing the corporate reins to successor Sassine Ghazi, who is now president and CEO of the firm.
Ghazi said on a conference call this week, “This transaction builds on our seven-year strategic partnership, which has achieved strong customer momentum, and now we're taking the next step. The complexity of system design is driving our customers' need for the fusion of electronics and physics augmented by AI. We're combining a leader in semiconductor design technology with a leader in simulation and analysis to address the rapidly emerging customer needs.”
In short, the match of technologies and expertise will allow Synopsys to offer a more integrated approach to chip design as chips themselves are becoming more integrated and complex.
"The megatrends of AI, silicon proliferation and software-defined systems are requiring more compute performance and efficiency in the face of growing, systemic complexity,” Ghazi added. “Chips are being designed at smaller scales than ever, approaching angstrom scale silicon software and hardware need to be co designed for optimal results, while systems from connected cars to medical devices must also be able to be monitored and optimized in the field.”
Ghazi explained that combining Synopsys' EDA solutions with Ansys' simulation and analysis capabilities will allow the combined entity “to deliver a holistic, powerful and seamlessly integrated silicon to systems approach to innovation to help maximize the capabilities of technology R&D teams across a broad range of industries.”
The combination also will expand Synopsys’ total addressable market by 1.5x to about $28 billion, is expected to result in near-term revenue and margin growth, and is anticipated to deliver about $400 million in cost synergies by the third year after the deal, and about $400 million in revenue synergies by the fourth year.
For Ansys, the acquisition follows a “comprehensive and competitive process” to evaluate how it could enhance its growth prospects for the future, according to Ansys President and CEO Ajei Gopal.
“Our business is strong and together with Synopsys we will unlock new opportunities to further accelerate our success, and deliver even greater value for our customers, partners and shareholders,” Gopal added, explaining that the acquisition announcement was being made at the sae time that Ansys was reporting strong fourth quarter 2023 earnings results, including revenue growth at the high end of its guidance.
“We also believe that this combination will open new opportunities for our employees. Both companies have world class teams and a larger company will deliver additional opportunities for those personnel to grow.”