By Adam Bernabeu, Malo Inizan and Mahaut Bonnet de Roovere (HEC Paris) ; Leo Luke Fridjhon, Xinyue Zhang, Hanchen Li and Abraham Vongkhamdy (Columbia University)
Photo: Vishnu Mohanan (Unsplash)
Overview of the deal
Acquirer : Synopsys
Target : Ansys
Implied Equity Value : N/A
Total Transaction Size : $35billion
Closed date : H1 25E
Target advisor : Qatalyst Partners LP (financial) ; Skadden, Arps, Slate, Meagher & Flom LLP and Goodwin Procter LLP (legal)
Acquirer advisor : Evercore (financial) ; Cleary Gottlieb Steen & Hamilton LLP (legal)
In a deal set for a leadership in silicon to system design solutions, the chip design software company Synopsys announced its intention to acquire software maker Ansys for $35 billion on January 15, 2024. The transaction amount is $35bn; Synopsys intends to fund the $19 billion of cash consideration through its own funds and debt financing, with $16 billion of fully committed debt financing secured.
After a partnership with shared company cultures and customer demands since 2017, this strategic acquisition will further facilitate an integration of Synopsys’s expertise in semiconductor electronic design automation and Ansys’s extensive simulation and analysis portfolio. The expected benefits of this deal include considerable value creation, expansion in total addressable market, enhanced technological and financial capabilities, and cost and revenue synergies.
“Bringing together Synopsys' industry-leading EDA solutions with Ansys' world-class simulation and analysis capabilities will enable us 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" Sassine Ghazi, CEO (Synopsys)
Company Details (Acquirer - Synopsys)
Synopsys is the world leader in the electronic design automation (EDA) industry which consists in software to design chips. Such software is critical to design more and more complex chips with new features as power consumption or code security requirement. The demand is growing with the exponential growth of use of chips from integration in any devices (medical, aerospace, industry) to new AI needs. Synopsis has built its market share through more than 45 acquisitions over the last decades in order to broaden its technology portfolio in silicon IP and engineering, verification and prototyping, chip design or software security and quality.
Founded in 1986, headquartered in Mountain View, CA
CEO: Sassine Ghazi
Number of employees: 20,300 (as of 2024)
Market Cap: $87,042 (mm) (as of 02/08)
EV: $83,673 (mm)
LTM Revenue: $5,842.6 (mm)
LTM EBITDA: $1,516.2 (mm)
LTM EV/Revenue: 14.3x
LTM EV/EBITDA: 51.2x
Company Details (Target - Ansys)
Ansys is an engineering simulation company based in Canonsburg, Pennsylvania, that provides simulation-driven solutions for product development in a variety of industries such as healthcare, aerospace, automotive, and electronics.
Furthermore, their software allows engineers to virtually test and optimize products, and reduce development time and costs. With a global presence in over 40 countries, Ansys supports an open Partner Ecosystem to tackle customers’ complex engineering challenges with confidence.
Founded in 1970, headquartered in Canonsburg, Pennsylvania (USA)
CEO : Ajei S. Gopal
Number of employees : 6,100
Market Cap : $30.04 Billion (as of 02/08/2024)
EV : $30.21 Billion
LTM Revenue : $2.16 Billion
LTM EBITDA : $717.76 Million
LTM EV/Revenue : 13.99
LTM EV/EBITDA : 42.09
Projections and Assumptions
Short-term consequences
Following the announcement on January 16, 2024, that Synopsys will acquire Ansys for about $35 billion, there were notable changes in the market. A 4.8% decrease in Ansys shares and a small 3.8% increase in Synopsys shares were indicative of the market's early reactions to the news. In the medium term, improved silicon-to-systems solutions enhanced with AI integration are expected to result from the coming consolidation between two titans in simulation and semiconductor design technologies. Because of essential industry megatrends that require the integration of electronics and physical systems, the union is expected to dramatically expand the Total Addressable Market (TAM) for the combined company, driving it to an estimated $28 billion and opening up new growth and opportunity opportunities. A strong stream of high-growth, high-margin, recurring revenues is expected to result from the acquisition financially, strengthening financial resilience and allowing for a greater allocation of resources to research and development—possibly creating a competitive advantage in the market.
Regulators, particularly in important countries like China, are concerned about the deal's conclusion, which might cause approval processes to take longer than expected. Complex integration issues, such as decision-making delays, cultural assimilation, and managerial diversion, also have short-term repercussions. As the transaction moves forward, stock price swings caused by regulatory rumors and investor moods are expected. Workers confront short-term doubts about their responsibilities and job security amid expected synergies. Simultaneously, clients can take a wait-and-see stance, assessing how the combined company would affect their support and product offerings before making any more expenditures. Notwithstanding these temporary obstacles, effective integration and regulatory navigation offer long-term advantages, underscoring the significance of close observation and constant stakeholder communication throughout the process.
Long-term upsides
The combination of the long-standing partners – Synopsys and Ansys have been collaborating for 7 years – brings together two industry front-runners, integrating expertise in the Electronic Design Automation (EDA) and engineering simulation software. This calculated move cements Synopsys as an all-inclusive provider of advanced solutions in the entire product development lifecycle, from planning through verification and testing. As demand for customized chips and increasingly complex electronics is steadily growing in several industries, the merger will give Synopsys an edge on its competitors.
Due to this enlarged offering, customers may now take advantage of enhanced productivity, quicker time-to-market, and smoother interoperability. The acquisition would also allow Synopsys to target other industries, such as semiconductors, automotive, aerospace, and military industries. Aircraft designers and car manufacturers already utilize Ansys software, and the demand for integrated design and simulation is growing. When Synopsys and Ansys pool their resources, technologies, and expertise, they may take on well-established rivals and upset the current market equilibrium. In particular, they would fulfill customers’ desire for a “fusion of electronics and physics” as manufacturers of various industries recognize an increasingly important role for semiconductors in their products.
The deal is anticipated to be finalized in the first half of 2025. In the second full year following the deal’s closure, Synopsys anticipates the acquisition will increase its adjusted earnings per share. Synopsys’ total addressable market is estimated to grow to $28B, a 50% growth.
Risks & Uncertainties
At a cost of $35 billion, Synopsys' acquisition of Ansys negotiates a difficult terrain of dangers, chief among them being regulatory obstacles. Given the two businesses' positions in possibly overlapping markets, authorities may see the transaction as a step towards undue market concentration, raising antitrust issues, making it harder to get legal approval.
Moreover, due to their previously difference-remained technologies and products, the combined entity may face the destabilized customer confidence and customer-segment changes. This requires the entity to establish a strong internal cohesiveness, integrate their disparate technology infrastructures, and coordinate a unique corporate culture, which are challenging and risky tasks.
Another important consideration is the acquisition's heavy debt load: questions could be raised regarding Synopsys's long-term financial stability and leverage. Whether the financial capacity is stable or not would largely affect the entity’s capacity to develop and adapt in such a field where technical advances swiftly.
Therefore, to fully realize the potential of this historic transaction, Synopsys and Ansys need to navigate a multifaceted matrix of difficulties that are shaped by these factors through comprehensive preparation, strategic insight, and adaptable execution.
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