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Chip design company Synopsys has decided to buy simulation and analysis firm Ansys for $35 billion. This is a major move in the tech industry, especially as chip and system companies grapple with the slowing progress of Moore’s Law, the prediction made by Intel’s co-founder Gordon Moore in 1965 that chip components would double every couple of years.
Following the announcement, Synopsys’ stock price increased by 2.8%, while Ansys’ stock price dropped by 5%.
This acquisition will merge two leading companies, combining Synopsys’ expertise in semiconductor electronic design automation (EDA) with Ansys’ robust simulation and analysis portfolio, creating a powerful force in silicon-to-systems design solutions.
As part of the agreement, Ansys shareholders will get $197.00 in cash and 0.3450 shares of Synopsys common stock for each share they own. This translates to an enterprise value of $35 billion, based on Synopsys’ closing stock price on December 21, 2023.
The merger aims to meet the rising demand for the integration of electronics and physics, boosted by artificial intelligence (AI). By merging Synopsys’ EDA technology with Ansys’ simulation capabilities, customers will benefit from a comprehensive approach to innovation, addressing the growing complexity brought on by AI, silicon proliferation, and software-defined systems.
The integration is seen as a means to accelerate Synopsys’ growth faster than the broader semiconductor industry over the next five to seven years.
The deal is also intended to significantly increase Synopsys’ total addressable market (TAM) by 1.5 times to approximately $28 billion, growing at an estimated 11% annual rate. Synopsys expects the deal will significantly boost its non-GAAP earnings per share within two years after closing and even more in subsequent years.
The transaction still needs approval from Ansys shareholders and regulatory bodies. It is expected to be finalized in the first half of 2025.
This acquisition reflects a broader trend of consolidation in the tech sector, with companies combining their strengths to face evolving industry challenges.
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