( ESNUG 595 Item 6 ) ------------------------------------------------------- [01/26/24]
Subject: Cooley gives his Las Vegas odds on Sassine's ANSS-SNPS merger succeeding
FIRST, HERE'S THE SURPRISE STORY:
"This transaction will create a massive new player [SNPS] in a sector of the
business software industry that is already highly consolidated, which
Wells Fargo said in a note creates regulatory uncertainty. After the news,
Synopsys shares were up 3.8% to $513, but Ansys down 4.8% to $329.86."
Though Ansys is not a direct competitor to either company, the deal could
trigger regulatory scrutiny, especially key markets such as China, where
approval times have become more difficult to predict."
"Based on many, many, many discussions, we believe that this deal should be
done in the first half of '25," Sassine Ghazi said. However, "we gave
ourselves 24 months with the priority and objective to get it done."
- from Reuters (01/16/24) - Synopsys to buy Ansys in $35 billion deal
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"Cadence (CDNS) and Siemens (SIEGY) made bids for Ansys (ANSS) before agreeing
to a $35 billion sale to Synopys (SNPS).
Ansys fell 4.1%, while Synopsys rose 3.6%.
Cadence Design (CDNS) kicked off the sales process for Anysys (ANSS) in 2023
when it originally approached ANSS last year, according to CNBC's David Faber.
Faber didn't know the price of the bids that the firms' made, though he
believed they were below Synopsys (SNPS)."
"An Ansys (ANSS) deal comes after Bloomberg first reported late last month
that Ansys was reviewing its options amid takeover interest, which sent its
shares soaring 18% on Dec. 22, 2023. The deal announced Tuesday (today)
represents a 29% premium to Ansys closing price on Dec. 21, 2023."
- from CNBC (01/16/24) - Cadence, Siemens had also made bids for Ansys
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ALL HAIL, JAY VLEESCHHOUWER: Before I go into one of my usual highly detailed and
highly opinionated analysis of this news, I have to give mondo public credit to our
very own Jay Vleeschhouwer of Griffin Securities...
... because on 12/26/2023, Jay wrote the very first detailed analysis of this possible
acquistion 3 weeks before this deal actually closed! Talking 12 pages of analysis!!!
And since then, I have freely stolen Jay's data from that report -- plus other of Jay's
reports on this news -- so I could appear to opine on it knowledgeably.
That is, I'm using Vleeschhouwer data, but all the opinions here are Cooley opinions.
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HERE'S HOW THE SNPS-ANSS NEWS IMPACTS THE EDA PLAYERS:
This is (obviously) a BIG WIN for Ajei Gopal, CEO of Ansys
To sell ANSS for a 29% premium and at billion dollar numbers for this 29% premium
is a monumental achievement for any CEO inside or outside of EDA.
In round numbers, ANSS was selling for $295 a share closing Dec. 20, 2023 (before
Bloomburg News reported on 12/21/2023 that Ansys is "weighing options, including
a sale" story) making the pre-merger ANSS marketcap:
$295 per share X 87.4 M shares == $25.8 billion ~== $26 billion marketcap
But Sassine is paying $390 a share, meaning SNPS paying $34 billion for ANSS.
Simple math
$34 billion (what SNPS is paying)
- $26 billion (what ANSS is worth)
---------------------------------------------
$8 billion premium Ajei got for ANSS
An $8 billion premium?!!!?? Ajei scored BIG TIME here!
To put this in perspective, this $34 billion for SNPS to buy ANSS is 30% more
than what Microsoft paid ($26 B in 2016) to acquire LinkedIn. Congrats, Ajei.
If I were Ajei, I would be bragging to my NYC Yacht Club buddies:
"Hey! I got Sassine to pay an extra $8 billion on top of the ANSS'
marketcap value! An EXTRA $8 billion dollar-os! EXTRA !!!!"
"I'm now in the MAJOR LEAGUES with guys like Bill Gates and Elon Musk!
I'm going shopping for my own private island now! Tally-ho!"
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This is (also obviously) a BIG WIN for Sassine Ghazi, CEO of Synopsys
He's having SNPS revenues leapfrog 43% to $7.6 billion if he can pull this
off! (Details follow in the rest of this report ...)
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And it's also a BIG WIN for Anirudh Devgan, CEO of Cadence
If I were Anirudh, I would be bragging to my Sand Hill Road buddies:
- "Yea, I kicked off the possible ANSS-CDNS merger talks in late 2023,
right as Sassine was taking the SNPS reins from Aart.
It was a total ambush to catch Sassine by surprise and off guard."
"Instead of Sassine focusing on his SNPS employees as their new leader,
I had Sassine distracted and sleepless and unreachable for 4 weeks
worrying about my CDNS possibly acquiring ANSS. Not a good start."
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- "Holy crap! I can't believe by our CDNS bidding up ANSS, we actually
got Sassine to pay $34 billion for an ANSS that's making $2.26 billion
revenue! It'll take 15 years just to make back that $34 billion."
"Getting SNPS to pay out $34 billion for anything will seriously cripple
Sassine for all his future acquisitions for the next 10 years! Talk
about a rookie mistake!"
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- "Holy double crap! This is Sassine effectively endorsing my strategies for
Cadence for the past 5 years of ...
(click on pic to enlarge image)
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... the critical importance of having your multi-physics tools very tightly
integrated with your chip/chiplet design EDA tools."
(Otherwise why would Sassine drop this incredible amount of coin to buy ANSS
other than to tightly integrate them with his own SNPS tools?)
Over the past 5 year (since 2019), I've had over 1,000 CDNS R&D engineers
working to systematically replace each of the Ansys point tools ...
 
Ansys RedHawk-SC ==> Cadence Voltus
Ansys HFSS ==> Cadence Clarity
Ansys IcePack ==> Cadence Celsius
Ansys SiWave ==> Cadence Sigrity
Ansys Designer ==> Cadence AWR
Ansys RaptorX ==> Cadence EMX
Ansys VeloceRF ==> Cadence EMX Designer
Ansys Fluent ==> Cadence Fidelity
... but with the bonus that my CDNS "ANSS" tools have significantly much
(10x to 100x) more capacity than their 1994 technology ANSS equivalents; plus
my CDNS "ANSS" tools are multi-threaded and multi-machine -- something that
these old 1994 technology ANSS tools never had to begin with! -- plus my
CDNS "ANSS" tools are very tightly integrated with custom & digital PnR!"
And, gosh, would it be rude of me to also point out that my Cadence has the
only complete physical design toolset that goes:
RTL => gates => placed-gates => PnR => power => thermal
all with the same internal databases and tight integration between the
tools and with integrated reports?"
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And even a BIG WIN for Joe Sawicki and Tony Hemmelgarn of Siemens Digital
If I were Tony, I would be bragging to my Plano Shooting Club buddies:
"Holy crap! I can't believe by our Siemens bidding up ANSS, we actually
got Sassine to pay $34 billion for an ANSS that's making $2.26 billion
revenue! It'll take 15 years just to make back that $34 billion."
"Getting SNPS to pay out $34 billion for anything will seriously cripple
Sassine for all his future acquisitions for the next 10 years! Talk
about a rookie mistake!"
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If I were Joe, I would be bragging to my Wilsonville Red Robin buddies:
"The EDA biz is a lot like three dimensional chess from the original Star Trek."
"Sometimes the best move in EDA is to encourage your rival to make a bad move,
a really bad move. A really bad $34 billion move..."
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SHOW ME THE MONEY! Now, here's that stolen Vleeschhouwer data that I spoke of earlier.
It's how Jay sees the how the numbers will work for a combined ANSS-SNPS corporation.
(Remember, it's Jay's data, but Cooley opinions here!)
Here's how Synopsys' $5.32 billion EDA revenue roughly broke out for 2023:
SNPS CORE EDA REVENUE: what came in for Design Compiler, PrimeTime,
ICC2, Fusion Compiler, Formality, Custom Compiler, PrimeSim tools $3,185 million
SNPS IP REVENUE: all the sales of both hard and soft DesignWare IP $1,543 million
SNPS HW REVENUE: all the sales of Zebu and HAPS boxes $590 million
Here's how Ansys' $2.27 billion revenue roughly broke out for 2023:
ANSS EDA REVENUE: what came in for the Apache, Helic, and Sequence
tool sales. That's tools like RedHawk-SC, Totem-SC, PathFinder-SC,
PowerArtist, Clock-FX, RaptorH, RaptorQu, Exalto, VeloceRF $445 million
ANSS CFD REVENUE: sales from Ansoft/Fluent HFSS/CFX meshing tools $485 million
ANSS MECHANICAL REVENUE: sales from mechanical/structural tools $1,060 million
ANSS "OTHER" REVENUE: sales from materials mgmnt SW, embedded SW,
photonics/optical SW, space mission SW, and PLM SW tools $285 million
Together makes a combined SNPS-ANSS $7.59 billion revenue monster EDA corporation
$5.32 billion
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+
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$2.27 billion
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==
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$7.59 billion
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With an operating margin SNPS 35% and ANSS 42%, I'm guessing SNPS-ANSS will be 38%.
And SNPS' growing backlog ($8.6 billion on 23Q4) shows the ability to pay for ANSS; plus
it implies the new SNPS-ANSS backlogs in the $8.6 + $1.2 == $9.8 ~== $10 billion range.
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COOLEY'S LAS VEGAS ODDS ON ANSS-SNPS:
Looking ahead to January 2027, as in 48 months from today, I give the following Las Vegas
betting odds on this ANSS-SNPS merger ...
10% chance
that
ANSS-SNPS
is a
TOTAL DISASTER
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In next 48 months, the SNPS Board of Directors could have a whimsical change of mind and outright fire Sassine for unknown reasons.
Or the U.S. regulatory folks could put the kibosh on any SNPS-ANSS merger for whatever cryptic reasons the U.S. Government does what it does.
Or the world economy could go into a global depression where all fiat currency is worth zero and we're all standing in line at soup kitchens for our food.
Or something else totally unforseen crushes this merger
Since I'm an engineer, it makes me a pessimist by default. So to be paranoid -- and safe -- and to make sure I cover all my bases -- I give this a 10% chance of something like this happening within the next 48 months. "See? I warned you that this might happen in my report!"
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10% chance
that
ANSS-SNPS
gets
DELAYED
or
MIXED RESULTS
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In the next 48 months, Cadence or Siemens or AutoCad or PTC or Dassault or some other unknown rival could lobby the U.S. regulatory folks to seriously mess with this SNPS-ANSS merger.
This could seriously delay it beyond the anticipated 24 months -- with each additional delayed month messing with SNPS getting a true unified SNPS-ANSS flow to market.
This won't kill the deal as much as delay it beyond the 48 month scope of my Las Vegas odds here.
Or the mainland Chinese government could mess with this merger, but that only impacts the mainland Chinese market.
(I've heard those mechanical/structural tool vendor guys can be quite viscous to each other.)
Again, to be paranoid and safe, I also give this a 10% chance of happening.
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80% chance
that
ANSS-SNPS
is a
SUCCESS
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Ansys could NOT have merged with Siemens; the U.S. regulatory bodies frown on foreign companies taking over U.S. companies.
Ansys could NOT have merged with Cadence; there's simply waaaay too much tool overlap triggering U.S. Anti-Trust laws.
Ansys CAN merge with Synopsys because there's no tool overlap, so no anti-trust issues.
In fact, these ANSS tools are a sweet, sweeeeeeet compliment to the existing SNPS toolset because they nicely fill in the technical holes SNPS has.
It's predicted that SNPS-ANSS will take 18 to 24 months to get U.S. regulatory approval.
Back in 2017, when Sassine was the SVP of SNPS Design, he personally spearheaded the SNPS-ANSS EDA tool partnership
making Sassine the one guy with 7 years history working between these two companies. He knows all the key people in both companies to make a true SNPS-ANSS EDA tool integration to happen crazy super zippy fast once the SNPS-ANSS deal is approved.
Because of that, I expect the true SNPS-ANSS EDA tool merger will be completed by 2027 or probably MUCH earlier.
I suspect that blending in the ANSS CFD HFSS tool into a SNPS 3DIC chiplet flow will be more of a challenge because ANSS HFSS needs to be seriously upgraded to keep up with the CFD
(see ESNUG 586 #5, 588 #17, 588 #18, 592 #5) that Anirudh is already throwing against ANSS in the 3DIC chiplet business today.
(Hopefully ANSS R&D will have these upgrades done within the next 24 months so it'll only be an integration problem for Sassine once the deal is approved.)
The other ANSS multiphysics CFD tools (like ANSS Fluent) will probably do well under Sassine because they're natural adjacencies to chip, chiplet, board, and system design.
(ANSS EDA and CFD tools pull in $930 million a year. Those I know. But I can't speak about the remaining $1.3 billion annual revenue from ANSS mechanical/structural tools, materials mgmnt SW, embedded SW, photonics/optical SW, space mission SW, and PLM SW tools -- because they're all waaaaay beyond my engineering purview.)
What I really did like is it's NOT a dumb take-the-money-and-run deal. It's NOT $34 billion in cash. It's 1/2 in $17 billion cash 24 months from now.
And 1/2 in $17 billion worth of SNPS stock from now. Because everyone has to wait 24 months for government approval.
That's the making of a very smart ANSS-SNPS marriage.
I give this an 80% chance of happening within the next 48 months.
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BOTH SNPS AND CDNS WINS: No, that's not a typo. I see in 48 months from today that this
proposed SNPS-ANSS marriage means that both Sassine and Anirudh will win.
Anirudh will win because in 48 months from now he will have 9 years of his CDNS R&D
doing intense development of his own (10x to 100x) more capacity, multi-threaded and
multi-machine ANSS-equivalent tools the same internal databases and tight integration
into his CDNS Innovus/Virtuoso/Tempus design tools. 9 years!
Sassine will win because in 48 months from now he will have ANSS RedHawk-SC, Totem-SC,
PathFinder-SC, PowerArtist, Clock-FX, RaptorH, RaptorQu, Exalto, VeloceRF tools all
tightly integrated with his SNPS Design Compiler, PrimeTime, ICC2, Fusion Compiler,
Custom Compiler tools. (But getting them all on the same internal databases might
take significantly longer than 48 months from today to achieve -- but it will
be in the Top 5 of his roadmap and will eventually happen!)
Plus Sassine growing his SNPS revenue by 43% to $7.6 billion just by doing one very
clever acquisition is nothing to ignore!
AND THE BIGGEST WINNER IS: the EDA users. This give us two viciously competing EDA
vendors, Synopsys and Cadence, who are constantly going neck-to-neck to sell you the
best-of-all-possible chip, 3DIC chiplet, board, and system design tools. Yay, users!
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