Synopsys to Acquire SpringSoft

In a highly competitive industry, the strong get stronger and the others, well the others survive. With the proposed acquisition of Springsoft, Synopsys will strengthen its position in the design and verification market and also get a boost in the custom IC design market.

Two direct competitors look in danger of loosing market share. Mentor Graphics has seen its position as the leader in digital design and verification slowly erode with increase technology and quality in competing products from Cadence and Synopsys. Now with the Verdi and Siloti products, Synopsys will be even more competitive and the Questa family of products will be under even more pressure. The problem for Mentor is that both of these Springsoft products are practically already integrated in the Synopsys design flow. Thus the usual delay required to integrate technology and development staff will not be significant in the case of this acquisition.

Industry watchers who both pay attention and understand technology have known for some time that Mentor has been concerned about the increased competition from Synopsys, and that advances by Cadence have not made life any easier for Mentor's marketing and sales organization dedicated to both Questa and Vista products.

The same cannot be said for Laker, Springsoft custom IC design and layout product. In this case integration of technology and development teams will be required, but the result can increase the degree of competition Synopsys will be able to offer in the market against Cadence's Virtuoso product family.

None of these changes are happening in a vacuum either. The EDA industry is not changing, it has already changed. Cooperation between an EDA vendor and a foundry to offer a reliable development and production environment for leading manufacturing processes requires that both parties be strong financially and technologically. Synopsys has worked diligently in the last 18 months to develop and implement a plan to address any possible weakness its customers may find. This is not to say that its competitors have been quiet. Mentor has achieved significant improvements in embedded software and MEMS integration, for example. Both of these market segments promise above average growth in the near term. Cadence is close to finishing its efforts to implement a new corporate financial and organizational structure that will make it more competitive and more attractive to the financial community.

Chi-Foon Chan, president and co-CEO at Synopsys characterized the acquisition as follows. "This acquisition will increase Synopsys' investment in Taiwan by growing our local engineering expertise, technology development capabilities and customer support. Combining SpringSoft's team and platform with Synopsys' complementary technology will help Synopsys lead further innovations in debug to more rapidly address the growing verification challenge. Simultaneously, SpringSoft's innovative custom implementation solution and its strong presence in leading Asian, European and U.S. semiconductor companies will help accelerate Synopsys' delivery of automation and innovation to an area of IC design that has been stagnant in the past."

The Numbers

Synoopsys is acquiring Springsoft through its Taiwan subsidiary, a convenient tool given that Springsoft is a Taiwanese company. Under the terms of the agreement, Synopsys Taiwan will commence a tender offer to acquire all of the outstanding shares of SpringSoft for NT$57.00 (approximately US$1.90) per SpringSoft share in cash and acquire any remaining shares pursuant to a follow-on merger. The gross transaction value will be approximately US$406 million (NT$12.2 billion), or approximately US$305 million (NT$9.2 billion) net of cash acquired. The transaction, which is expected to close in the first quarter of fiscal 2013, is subject to the minimum tender of 51 percent of the current outstanding SpringSoft shares, the approval of the follow-on merger by SpringSoft shareholders, regulatory approvals in Taiwan, and other customary closing conditions.
After the closing, SpringSoft will become part of Synopsys and SpringSoft stock will cease trading. When completed, Synopsys anticipates the transaction to be slightly accretive to fiscal 2013 non-GAAP earnings per share.

In less than twelve months Synopsys has acquired Magma, Ciranova, and Springsoft. The acquisitions have all been execute in financial terms favorable to Synopsys who has managed to maintain a strong cash position even after the acquisitions.