Movement in the technology sector: Synopsys’ acquires Ansys
Marking another acquisition driven by the proliferation of AI, Synopsys announced its approximately $35 billion acquisition of Ansys on January 16th, 2024. Both companies have decades of experience in providing products to aid the design and development of advanced silicon products and related technologies. The complementary businesses will benefit from the combination of Synopsys’ electronic design automation technology and Ansys’ portfolio of simulation and analysis computer system resources. The acquisition is expected to close by mid-2025, pending regulatory approval and final conditions.
Synopsys is financing the acquisition through a combination of cash, debt, and equity. The financing structure involves ~$19 billion in cash, ~$16 billion of which was secured through debt financing. The remaining ~$16 billion will be covered through an equity issuance.
Ansys shareholders will receive $197.00 in cash and 0.3450 shares of Synopsys per share of Ansys common stock, representing an implied share value of $390.19 and an approximate 29% premium on Ansys December 21st share price. This structure will yield about 16.5% percent of the combined company to Ansys shareholders, and the deal is expected to be accretive within the next two years, increasingly so in the long run.
Analysts expect the company to achieve cost and revenue synergies of up to $400 million within four years of finalizing the acquisition, with the potential to rise to $1 billion in the future.
Since announcing the acquisition on January 16th, Synopsys’ share price has risen 8.48% as of February 16th.
The deal is expected to create a leader in silicon systems design solutions, creating a combined company that will be able to provide solutions to more complex software demands. With Synopsys’ expertise in providing tools and services to silicon design and manufacturing, and Ansys’ advanced simulation software, the combined entity serves as a one stop shop for modern engineering needs.
The acquisition positions Synopsys to provide more efficient systems to support research and development needs for growing companies in automotive, aerospace and industrial areas. With further expertise in automating design and manufacturing for advanced semiconductor chips, Synopsys will also be able to meet the recent demand by artificial intelligence companies. Experts predict that the acquisition will increase Synopsys’ total addressable market by 50%, worth as much as $28 billion.
The acquisition demonstrates the impact AI has had on the financial markets in the past several months. It is the biggest acquisition in the technology sector since Broadcom’s $69 billion acquisition of VMware in November of 2023. More movement in the technology sector can be expected in 2024 to meet the growing demand for products and services for AI.
