Synopsys and Ansys announced today that they have entered into a definitive agreement under which Synopsys will acquire Ansys. Under the terms of the deal, Ansys shareholders will receive $197 in cash and 0.3450 shares of Synopsys common stock for each Ansys share, representing an enterprise value of approximately $35 billion based on the closing price of Synopsys common stock on December 21, 20233. Combining Synopsys’ pioneering semiconductor electronic design automation (EDA) with Ansys’ broad simulation and analysis portfolio will create a leader in silicon-to-systems design solutions.
Deal Rationale
1.) Combining Leading Capabilities to Meet Customer Demand – Intelligent systems today demand the integration of semiconductor design simulation and analysis to ensure interconnected systems function properly in real-world settings. And combining Synopsys’ EDA technology with Ansys’ established simulation and analysis capabilities can provide customers a comprehensive, powerful and system-focused approach to innovation. All of Ansys’ customers, including those outside of the semiconductor industry, can benefit from access to a comprehensive portfolio of products and technologies that will drive innovation.
2.) Accelerates Strategy and Growth in Attractive, Adjacent Areas – Synopsys and Ansys have complementary businesses and significant expansion opportunities. The combination will enhance Synopsys’ Silicon to Systems strategy across the core EDA segment and in highly attractive adjacent growth areas such as Automotive, Aerospace, and Industrial, among others, where Ansys has an established presence and successful go-to-market experience.
3.) Complementary Fit – Synopsys and Ansys had a successful and growing partnership since 2017 and share a culture built on integrity, execution excellence, and empowering customers. Combining their highly complementary solutions is expected to provide customers with a broader, deeply integrated suite of software tools to solve their most complex design challenges while also gaining valuable insights through model-based analysis of complex systems.
4.) Meaningfully Expands Total Addressable Market – Synopsys’ total addressable market (TAM) is expected to increase by 1.5x to approximately $28 billion. And this combined TAM is expected to grow at roughly an 11% CAGR4, driven by megatrends accelerating the need for the fusion of electronics and physics across industries.
5.) Bolsters Synopsys’ Strong Financial Position and Outlook – This combination is expected to strengthen Synopsys’ financial profile. And the combined company expects to continue its industry-leading, double-digit growth, which is expected to outpace TAM growth. The combination is expected to expand Synopsys’ non-GAAP operating margin by approximately 125 basis points and unlevered free cash flow margins by approximately 75 basis points the first full year post-closing. The combination is expected to be accretive to non-GAAP EPS within the second full year post-closing and substantially accretive after that.
6.) Strong Balance Sheet Supporting Rapid Deleveraging – The combination is expected to generate substantial and sustained free cash flow, which will enable rapid de-leveraging to less than 2x debt to Adjusted EBITDA within two years post-closing, with a long-term leverage target of less than 1x. Synopsys expects to maintain investment grade credit ratings given its strong cash flow generation and commitment to rapidly de-lever.
7.) Delivers Cost and Revenue Synergies – The combined company expects to achieve approximately $400 million of run-rate cost synergies by year three post-closing and approximately $400 million of run-rate revenue synergies by year four post-closing, growing to more than approximately $1 billion annually in the longer-term.
Deal Terms
The implied per share consideration of $390.19, based on the closing price of Synopsys common stock of $559.96 as of December 21, 2023, which represents a premium of approximately 29% over Ansys’ closing stock price on December 21, 20235 and a premium of approximately 35% to Ansys’ 60-day volume-weighted average price for the period ending on the same date. And under the terms of the agreement, Ansys shareholders are expected to own approximately 16.5% of the combined company on a pro forma basis.
Synopsys plans to fund the $19 billion of cash consideration through its cash on hand and debt financing. Synopsys has obtained $16 billion of fully committed debt financing.
The deal is anticipated to close in the first half of 2025, subject to approval by Ansys shareholders, the receipt of required regulatory approvals and other customary closing conditions.
Advisors
Evercore is serving as financial advisor to Synopsys, and Cleary Gottlieb Steen & Hamilton LLP serves as legal advisor. Qatalyst Partners LP serves as financial advisor to Ansys, and Skadden, Arps, Slate, Meagher & Flom LLP, and Goodwin Procter LLP serve as legal advisors.
KEY QUOTES:
“The megatrends of AI, silicon proliferation and software-defined systems are requiring more compute performance and efficiency in the face of growing, systemic complexity. 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. This is the logical next step for our successful, seven-year partnership with Ansys and I look forward to working closely with Ajei and the talented Ansys team to realize the benefits of this combination for our customers, shareholders and employees.”
— Sassine Ghazi, President and CEO of Synopsys
“Since inception 37 years ago, Synopsys has been an innovation pioneer, central to world-changing semiconductor advances in computation, networking, and mobility, and now enabling the new era of ‘pervasive intelligence.’ Joining forces with Ansys, a company we know well from our long-standing partnership, is the latest example of how Synopsys remains at the forefront. Our Board and management team carefully evaluated our top strategic options to lead and win in this fast-growing new wave of electronics and system design. The technology-broadening team-up with Ansys is an ideal, value-enhancing step for our company, our shareholders, and the innovative customers we serve.”
— Aart de Geus, Executive Chair and Founder of Synopsys
“For more than 50 years, Ansys has enabled customers to design, develop and deliver cutting-edge products that are limited only by imagination. By joining forces with Synopsys, we will amplify our joint efforts to drive new levels of customer innovation. This transformative combination brings together each company’s highly complementary capabilities to meet the evolving needs of today’s engineers and give them unprecedented insight into the performance of their products. Ansys has a strong foundation, as demonstrated by preliminary annual contract value (“ACV”) results for Q4 that are expected to exceed the high end of our guidance, and I am confident that building on our partnership with Synopsys will position us well to deliver even greater value for our customers, partners and shareholders. The combined company will accelerate the development of our joint portfolio and deliver an increased level of innovation, which will benefit Ansys’ traditional customers. I am proud of all that our employees do every day to make Ansys and our customers successful and look forward to the combined company achieving even greater heights in this next chapter.”
— Ajei Gopal, President and CEO of Ansys
