Next billion-dollar deal in the software industry

Last Updated: 18. Januar 2024By

Software industry in a buying frenzy. Now the second mega deal within a few weeks has been announced. After Broadcom’s acquisition of software manufacturer VMWare for 9 billion dollars in November, yesterday came the next move: Synopsys wants to swallow Ansys, a specialist in simulation software, for 35 billion dollars.

Ansys – The hidden beneficiary of the digitalization wave In the past, testing models was an expensive method to determine whether a newly developed part would work in real-world applications. However, there was no other way to test whether an idea was feasible.

Today, engineers can run their designs through simulation software to gain valuable insights and optimize their designs. This also leads to a reduction in development costs. The market leader in this field by far is Ansys. The US company has an annual revenue of 2.06 billion dollars, which is about twice as large as its closest rival.

Software solutions used in numerous industries Ansys offers multiple solutions in various areas such as optics, semiconductors, and fluids. This allows for the integration of Ansys software programs to create multilayered solutions, such as structural and thermal analysis on a circuit board. Its customer portfolio is impressive, including companies like Microsoft, Pfizer, Daimler, Samsung, and Autodesk. Even Nvidia uses the platform to simulate physical limits in chip development.

Ansys on a growth trajectory In the first nine months, Ansys‘ revenue climbed 6.8% to 1.46 billion dollars. Without currency effects, revenues increased by 7.6%. 47.5% of the revenue was generated in the Americas, while 27.3% came from the Asia-Pacific region (with 9.7% in Japan) and 25.2% from the EMEA region (Europe, Middle East, and Africa).

Particularly impressive: 83% of the total revenue was recurring, indicating a good predictability of business. The company reported a net profit of 423 million dollars, resulting in a high profit margin (note: profit in relation to revenue) of 28.8%.

Synopsys offers 35 billion dollars Now, the Synopsys corporation, focused on semiconductor design software, is offering 35 billion dollars for Ansys. Ansys shareholders will receive 197 dollars in cash and 0.345 Synopsys shares for each Ansys share they sell. Pending approval from antitrust authorities, the acquisition is expected to be completed in the first half of 2025. Synopsys and Ansys have been working together since 2017, offering software to design and test semiconductors.

A new heavyweight is born With this deal, a new heavyweight with a market value of over 100 billion dollars is created. Synopsys had a revenue of around 5.8 billion dollars and a profit of 1.2 billion dollars, making it equally highly profitable.

According to Synopsys‘ presentation on the acquisition, the target market will increase by 150% to 28.5 billion dollars. In addition, the company expects cost synergies of approximately 400 million dollars by year 3 and revenue synergies of approximately 400 million dollars by year 4 after the acquisition. Due to its high free cash flow, the company also plans to rapidly pay off its debt.

Ansys stock weakens While Synopsys‘ stock rose by 3% immediately after the announcement of the acquisition, Ansys‘ stock fell by 5% on Tuesday. Based on the closing prices on January 16, the acquisition price is 372 dollars, while Ansys‘ stock closed at 327 dollars.