Shares of Ansys surged after reports emerged suggesting that the simulation solution company is contemplating a sale. Bloomberg revealed that Ansys has been working with advisors in response to takeover interest, although unidentified sources also mentioned that the company may opt to remain independent.
Ansys specializes in assisting engineers in predicting the performance of their products. When approached for comment, the company declined and emphasized that “M&A rumors are not uncommon in our industry.”
The notable 11.4% increase in Ansys’ share price, the largest since March 2020 according to Dow Jones Market Data, clearly indicates that investors are eagerly responding to the news by placing a premium on the current market value.
With a market capitalization of $26.34 billion as of the previous day’s closing, Ansys is an attractive proposition for potential acquirers. The rise of the simulation industry and the increasing integration of these tools into the early stages of product design further enhance its appeal. However, William Blair software research analyst Dylan Becker cautioned that the company’s valuation and scale might limit the pool of potential buyers.
Cadence Design Systems, valued at $75 billion, has been identified as a possible suitor by Stifel’s Adam Borg and Oppenheimer’s Ken Wong in their recent notes. Cadence has been actively expanding its simulation capabilities through strategic acquisitions, including OpenEye Scientific and Cascade Technologies last year.
Simulation Market Offers Lucrative Opportunities for Growth
In a recent investor conference held this month, Cadence CEO Anirudh Devgan highlighted the immense potential for growth in the simulation market. Devgan revealed that this sector has a total addressable market expansion opportunity of $10 billion, making it an attractive area to invest in.
Another notable company that was mentioned by industry experts Borg and Wong is Synopsys. With a market capitalization of $85 billion, Synopsys is a leading player in the electronic design automation industry. The company has formed a longstanding partnership with Ansys, leveraging their respective technologies to advance chip designs.
Despite the significance of these developments, both Synopsys and Cadence have refrained from providing an official comment on the matter.
Following this news, Synopsys experienced a 2.5% decline in its share price, while Cadence observed a slight decrease of 0.6% on Friday.
Typically, when a takeover is announced, the acquiring company’s share price tends to decrease as they often pay a premium for the target company.
In unrelated news, Ansys recently released its third-quarter report, which had mixed results. One of the contributing factors was the impact of trade restrictions with China. Additionally, the company announced that their Chief Financial Officer, Nicole Anasenes, will be stepping down from her role.
RBC Capital Markets analyst Matthew Hedberg expressed surprise over the timing of the Bloomberg report but acknowledged that premium-type software assets are often sought after as potential targets for mergers and acquisitions.