Cadence to Acquire Hexagon's Engineering Business for €2.7 Billion

Cadence Design Systems, Inc., a leader in electronic design automation (EDA) software, has announced a definitive agreement to acquire Hexagon AB's Design & Engineering (D&E) business, including MSC Software, for approximately €2.7 billion. The transaction, comprising 70% cash and 30% Cadence common stock, is expected to close in the first quarter of 2026, pending regulatory approvals and customary closing conditions.

This acquisition aligns with Cadence's Intelligent System Design strategy, aiming to expand its system analysis portfolio and enhance multiphysics simulation capabilities. By integrating Hexagon's D&E technologies, Cadence seeks to offer a comprehensive platform for complex system design and analysis, addressing the growing demand for integrated electrical-mechanical design solutions.

Background on the Entities Involved:

  • Cadence Design Systems, Inc.: A U.S.-based company specializing in electronic design automation (EDA) software and engineering services. Cadence's tools are integral to the design and verification of complex semiconductor chips and electronic systems. The company serves a diverse clientele, including major semiconductor firms like Nvidia and Qualcomm.

  • Hexagon AB: A global leader in digital reality solutions, combining sensor, software, and autonomous technologies. Headquartered in Stockholm, Sweden, Hexagon operates across various industries, including manufacturing, construction, and geospatial. The D&E business, part of Hexagon's portfolio, specializes in computer-aided engineering (CAE) software solutions.

Details of the Acquisition:

  • Financial Terms: Cadence will pay approximately €2.7 billion for Hexagon's D&E business, with 70% in cash and 30% through the issuance of Cadence common stock to Hexagon.

  • Business Focus: Hexagon's D&E business includes MSC Software, known for its flagship products MSC Nastran and Adams. These tools are widely used in structural and multibody dynamics simulations across industries such as aerospace and automotive. In 2024, the D&E business generated approximately €265 million in revenue and employed over 1,100 people globally.

Strategic Implications:

  • Expansion of Cadence's Portfolio: This acquisition aligns with Cadence's Intelligent System Design strategy, aiming to expand its system analysis portfolio and enhance its capabilities in multiphysics simulations. By integrating Hexagon's D&E technologies, Cadence seeks to offer a comprehensive, unified platform for complex system design and analysis, addressing the growing demand for integrated electrical-mechanical design solutions.

  • Market Presence: The acquisition is anticipated to strengthen Cadence's presence in the structural analysis market and broaden its customer base, including leading aerospace and automotive original equipment manufacturers (OEMs) and Tier 1 suppliers.

Statements from Leadership:

  • Anirudh Devgan, President and CEO of Cadence: "By adding Hexagon’s D&E world-class simulation capabilities, we will expand our vision of Intelligent System Design to encompass the full spectrum of physical behavior—from electromagnetics and fluids to structures and motion."

  • Ola Rollén, Chairman of the Board for Hexagon: "Today’s announcement is a step in our plan to streamline Hexagon’s portfolio and focus on the capture, measurement, and use of real-world data, while also strengthening our financial flexibility."

Financial Impact:

  • Hexagon's Perspective: The D&E business contributed approximately €265 million to Hexagon's revenues in 2024, at a profitability level above Hexagon group averages. The transaction will generate a gain, details of which will be disclosed in Hexagon's third quarter 2025 interim report.

  • Cadence's Perspective: The acquisition is expected to be accretive to Cadence's earnings and will be funded through a combination of cash on hand and borrowings under existing debt facilities.

Regulatory and Closing Conditions:

The transaction is expected to close in the first quarter of 2026, subject to customary closing conditions and regulatory approvals.

Historical Context:

This acquisition follows Cadence's 2024 acquisition of Beta CAE Systems, further expanding its capabilities in engineering simulation.

Potential Themes for Further Exploration:

  1. Integration of Electrical and Mechanical Design: Exploring how the convergence of electrical and mechanical design tools can streamline product development processes.

  2. Impact on the CAE Software Market: Analyzing how this acquisition might reshape the competitive landscape of the computer-aided engineering software industry.

  3. Strategic Shifts in Hexagon's Portfolio: Examining Hexagon's decision to divest its D&E business in the context of its broader strategic objectives.

  4. Implications for Aerospace and Automotive Industries: Assessing how the combined capabilities of Cadence and Hexagon's D&E business could influence innovation in aerospace and automotive sectors.

This acquisition represents a significant development in the engineering software industry, with potential far-reaching implications for product design and development across multiple sectors.

Tags: #cadence, #hexagon, #acquisition, #software, #engineering

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