Synopsys agrees to buy system design firm Ansys for $35B

Chip design firm Synopsys has agreed to acquire simulation and analysis firm Ansys in a deal worth $35 billion.

It’s a big move within the tech industry as chip and system companies try to deal with the slowdown in Moore’s Law, the prediction first made in 1965 by Intel’s cofounder Gordon Moore that chip components would double every couple of years.

Synopsys saw its stock price rise 2.8% in the wake of the announcement while Ansys’ stock price dropped 5%.

This strategic move will bring together two industry leaders, combining Synopsys’ expertise in semiconductor electronic design automation (EDA) with Ansys’ extensive simulation and analysis portfolio, creating a powerhouse in silicon-to-systems design solutions.

Under the terms of the agreement, Ansys shareholders will receive $197.00 in cash and 0.3450 shares of Synopsys common stock for each Ansys share. This represents a significant premium, with an enterprise value of $35 billion based on the closing price of Synopsys common stock on December 21, 2023.

The acquisition is poised to address the increasing demand for a fusion of electronics and physics, augmented with artificial intelligence (AI). The integration of Synopsys’ EDA technology with Ansys’ simulation capabilities aims to provide customers with a comprehensive, integrated approach to innovation, particularly in the face of growing systemic complexity brought about by AI, silicon proliferation, and software-defined systems.

Kevin Krewell, a chip analyst at Tirias Research, said in an email to TechForgePulse, “It’s a bold move. The two companies already had a strategic partnership and this shows they value the relationship enough to combine the two companies. Advanced simulation is a natural partner to chip design as we move to chiplets. I wonder what government reviews of the deal will bring.”

And Mario Morales, a chip analyst at IDC, said in an email to TechForgePulse, “It’s a good size premium but the acquisition makes strategic sense as Synopsys and the EDA industry continue to expand the reach of IP, tools, and the silicon software model to address a broader set of customers and industries all vying to leverage AI, design, and IP on a bigger cloud platform. This acquisition will allow Synopsys to grow faster than the overall semiconductor industry over the next five to seven years.”

Patrick Moorhead, a chip analyst at Moor Insights & Strategies, said in an email,”It’s a hefty acquisition price, but Synopsys thinks it’ll be accretive in less than a year which is a positive. I like that the combined entities combine chip design with system design. With one set of combined tools, customers can design and simulate a chiplet, an SoC, a rack, a server, a fleet of servers and a datacenter. This could optimize the entire design which could mean the highest efficiency system leading to lower costs and less energy. “

Sassine Ghazi, CEO of Synopsys, said in a statement, “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.”

The combination is expected to enhance Synopsys’ silicon-to-systems strategy, not only in core EDA but also in attractive, adjacent growth areas. These areas include the automotive, aerospace, and industrial sectors, where Ansys has a strong presence and successful go-to-market experience.

Aart de Geus, executive chair and founder of Synopsys, highlighted the strategic evaluation that led to this decision, stating, “The technology-broadening team-up with Ansys is an ideal, value-enhancing step for our company, our shareholders, and the innovative customers we serve.”

For more than 50 years, Ansys has been a driving force in enabling customers to design cutting-edge products using simulation. Ajei Gopal, CEO of Ansys, said in a statement, “The combined company will accelerate the development of our joint portfolio and deliver an increased level of innovation.”

The acquisition is expected to significantly expand Synopsys’ total addressable market (TAM) by 1.5 times to approximately $28 billion, growing at an estimated 11% compound annual growth rate (CAGR). Synopsys anticipates that the deal will be accretive to non-GAAP earnings per share within the second full year post-closing and substantially accretive thereafter.

The transaction is subject to approval by Ansys shareholders, regulatory approvals, and other customary closing conditions. It is anticipated to close in the first half of 2025.

This strategic move reflects the ongoing trend of consolidation in the technology sector, with companies seeking to strengthen their positions by combining complementary capabilities to address evolving industry challenges.