Synopsys is acquiring Ansys for ~$35 billion to create a leader in silicon to systems design solutions.

This brings together Synopsys’ pioneering semiconductor electronic design automation (EDA) with Ansys’ broad simulation and analysis portfolio 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.

Today’s announcement advances Synopsys’ Silicon to Systems strategy and builds on a successful, seven-year strategic partnership with Ansys.

The complexity of today’s intelligent systems demands the integration of semiconductor design and simulation and analysis to ensure interconnected systems function properly in real-world settings.

The proposed combination provides customers a comprehensive, powerful and system-focused approach to innovation, both in Synopsys’ core EDA segment and highly attractive adjacent growth areas such as Automotive, Aerospace and Industrial where Ansys has an established presence.

Synopsys has delivered ~120% total shareholder return⁽¹⁾ (~3.5x the S&P 500) over the past three years – this transaction positions us to continue to deliver meaningful shareholder value.

The combined company expects to continue its industry-leading, double-digit growth, which is expected to outpace total addressable market (TAM) growth.

Synopsys’ TAM is expected to increase by 1.5x to approximately $28 billion and to grow at roughly an ~11% CAGR.⁽²⁾

Synopsys’ Non-GAAP Operating Margin⁽³⁾ is expected to expand by approximately 125 basis points and its Unlevered Free Cash Flow⁽⁴⁾ margin by approximately 75 basis points the first full year post-closing.

It is expected to be accretive to Non-GAAP EPS within the second full year post-closing and substantially accretive thereafter.⁽⁵⁾

Synopsys has identified an expected ~$400 million each of run-rate cost and revenue synergies, with revenue synergies expected to grow to more than ~$1 billion annually in the longer-term.

^{(1) As of December 21, 2023, the last trading day prior to media speculation regarding a potential transaction.
(2) Compound annual growth rate from 2023 to 2028.
(3) Non-GAAP Operating Margin is Non-GAAP Operating income for a period divided by revenue for the same period. Non-GAAP Operating Income is calculated as GAAP Operating Income excluding amortization of intangible assets, stock compensation, non-qualified deferred compensation plan, acquisition-related costs and restructuring charges.
(4) Unlevered Free Cash Flow Margin is calculated as Unlevered Free Cash Flow for a period divided by revenue for the same period.
(5) Non-GAAP Earnings Per Share is calculated as GAAP net income excluding amortization of intangible assets, stock compensation, acquisition-related costs, restructuring charges, and legal matters, adjusted for the difference between GAAP and non-GAAP tax rates, divided by fully diluted outstanding shares. Expected to be accretive the second full year post-closing including cost synergies only, and substantially accretive thereafter including cost and revenue synergies.}

Synopsys’ Board and management team have carefully evaluated options to advance its Silicon to Systems strategy for several years and identified systems and simulation as a growth priority.

By combining Synopsys and Ansys’ highly complementary solutions and teams, we can provide customers with a broader suite of software tools to address systemic complexity and maximize the capabilities of technology R&D teams across a broad range of industries.

Synopsys is confident that joining forces with Ansys is an ideal, value-enhancing step for our companies, our shareholders, and the customers we serve.

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 implies total consideration per share of $390.19 (implied premium of ~29%) and represents an enterprise value of approximately $35 billion based on the closing price of Synopsys common stock on December 21, 2023.⁽¹⁾

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 intends to fund the $19 billion of cash consideration⁽²⁾ through a combination of its cash on hand and debt financing. Synopsys has obtained $16 billion of fully committed debt financing.

With strong combined free cash flow generation, Synopsys expects to rapidly de-lever to <2x Debt / Adjusted EBITDA⁽³⁾ within 2 years post close and target <1x long-term, and to maintain an investment grade credit rating.

^{(1) The last trading day prior to media speculation regarding a potential transaction.
(2) Includes the refinancing of Ansys’ existing debt and transaction expenses.
(3) Adjusted EBITDA (“Adj. EBITDA”) is calculated as GAAP Operating Income excluding depreciation and amortization, stock compensation, non-qualified deferred compensation plan, acquisition-related costs and restructuring charges.}

Synopsys’ Board and management team are keenly focused on closing the transaction and a seamless integration thereafter.

With its strong existing partnership with Ansys, shared cultures and dedicated integration team, Synopsys is confident in its ability to successfully integrate the two best-in-class businesses.

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

This transaction represents a premium of approximately 29% over Ansys’ closing stock price on December 21, 2023 and a premium of approximately 35% to Ansys’ 60-day volume-weighted average price for the period ending on the same date.

The cash-and-stock structure provides certain cash value to Ansys’ shareholders, along with the opportunity to participate in the combined company’s long-term growth potential.

Additional details regarding the transaction will be available in Ansys’ proxy materials to be filed with the SEC.