Two of the engineering software market’s largest players are set to join forces in a $35 billion cash-and-stock deal.

Synopsys Inc., which makes chip design software, today announced that it will pay $197 per share of Ansys Corp., whose engineering applications are used to develop both processors and other products such as medical devices. Ansys investors will also receive 0.345 Synopsys shares for each share they sell. The deal’s $35 billion price tag represents a 29% premium to the former company’s last unaffected stock price.

Synopsys is a major provider of EDA, or electronic design automation, applications. Those are the software tools that chipmakers use to create new processor designs and test those designs for technical issues. Alongside its core EDA portfolio, Synopsys sells applications for related tasks such as optimizing manufacturing operations at semiconductor fabs.

Ansys, the company Synopsys is acquiring, has a broader market focus. It sells more than 50 engineering applications that target use cases ranging from car design to 3D printing. Ansys also offers more than a half-dozen programs optimized for chip design tasks, a product portfolio that was likely a particularly major factor in Synopsys’ decision to acquire the company.

Many of Ansys’ programs focus on helping engineers run so-called multiphysics simulations. Such simulations are used to study the physical phenomena that affect a system and the way those phenomena influence one another. A chipmaker, for example, can leverage Ansys’ software to evaluate how increasing the amount of electricity a processor draws influences its heat output. 

The company’s applications promise to ease a range of other tasks as well. One Ansys product, Clock FX, can help chip designers fix technical issues in the part of the processor that regulates its clock speed. Another Ansys application can be used to design quantum processors based on superconducting materials.

“The megatrends of AI, silicon proliferation and software-defined systems are requiring more compute performance and efficiency in the face of growing, systemic complexity,” said Synopsys Chief Executive Sassine Ghazi. “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.”

The acquisition builds on a technical partnership that the two companies have maintained since 2017. Ansys’ RedHat-SC line of applications, which helps chip engineers fix issues such as overheating in their processor designs, integrates with several of Synopsys’ EDA tools. It’s possible the latter company will seek to expand those integrations after the acquisition closes.

“The combined company will accelerate the development of our joint portfolio and deliver an increased level of innovation, which will benefit Ansys’ traditional customers,” said Ansys CEO Ajei Gopal.

Synopsys has also set other goals for the deal besides enhancing its product portfolio. The company expects to achieve annual cost synergies of $400 million three years after the acquisition closes, which is set to take place in the first half of 2025. Synopsys hopes to more than double those savings to about $1 billion per year in the longer term.

In parallel, the deal will unlock new revenue streams for the company. Ansys’ software is widely used in not only the chip industry but also a range of other markets, including the auto, aerospace and healthcare sectors. Synopsys estimates that the acquisition will expand its total addressable market by 50%, to $28 billion.

Artificial intelligence will likely play a key role in the company’s effort to address the growth opportunities unlocked by the deal. Last year, Synopsys and Ansys announced plans to roll out a raft of new AI-powered automation capabilities for their applications. The features will speed up tasks such as chip design optimization that currently involve a significant amount of manual work.

Synopsys’ acquisition of Ansys follows an earlier market expansion effort that focused on the cybersecurity segment. As part of that initiative, the software maker spent more than $800 million to buy three cybersecurity companies. Today, Synopsys offers its core EDA portfolio alongside a set of tools that developers can use to check their code for vulnerabilities before releasing it.

Image: Synopsys