Cadence Acquires Switzerland-Based BETA CAE for $1.24B

Cadence Design Systems Inc CDNS recently concluded the acquisition of Switzerland-based BETA CAE Systems International AG. The acquisition was announced in March 2024.

Back then, CDNS had highlighted that the deal involved Cadence paying approximately $1.24 billion, with 60% of the consideration in cash and 40% through the issuance of Cadence stock to BETA CAE shareholders.

Headquartered in Lucerne, BETA CAE specializes in offering multi-domain, engineering simulation solutions. BETA CAE offers a comprehensive platform that supports mechanical/structural, CFD and EM simulations, as well as the full simulation and analysis flow for multiphysics system simulations. Its flagship products include ANSA and META. BETA CAE has a heavy presence across several verticals, particularly in the automotive sector. Its products complement Cadence's system analysis portfolio.

Cadence Design Systems, Inc. Price and Consensus

Cadence Design Systems, Inc. price-consensus-chart | Cadence Design Systems, Inc. Quote

The acquisition could enhance Cadence's Intelligent System Design strategy by broadening its range of multiphysics system analysis offerings and helping Cadence enter the structural analysis vertical.

BETA CAE had approximately $90 million as annual revenues. CDNS expects BETA CAE to contribute around $40 million to the company's 2024 revenues.

However, the acquisition is expected to dilute Cadence's non-GAAP earnings per share by approximately 12 cents. The company anticipates the deal to become accretive in 2025, based on its debt repayment and share repurchase strategies.

Synergies From Acquisitions Driving Growth

Strategic acquisitions played a pivotal role in propelling the top-line performance. Prior to BETA CAE buyout, the company purchased California-based embedded software and system-level solutions provider Invecas, Inc in January 2024. The Invecas buyout added a skilled engineering team (based in Hyderabad, India), which would aid Cadence in offering its customers custom solutions across chip design, advanced packaging, product engineering and embedded software.

Apart from Invecas, CDNS also acquired Intrinsix to expand its footprint in the advanced nodes, radio frequency, mixed-signal and security algorithms' space.

The previous buyouts of Pointwise and NUMECA were aimed at increasing the system analysis portfolio with more CFD solutions. OpenEye Scientific Software acquisition would aid in augmenting its reach in the pharmaceutical and biotechnology markets.

As of Mar 31, 2024, Cadence had cash and cash equivalents of approximately $1.01 billion. Long-term debt amounted to $299.8 million. The strong cash balance could help the company to pursue further strategic acquisitions and other investments in growth initiatives.

However, acquisitions have affected its balance sheet, as a high level of goodwill and intangible assets added to the risk of investing in the company. CDNS' goodwill and intangible assets totaled approximately $1.91 billion or 33.4% of total assets as of Mar 31.

Based in San Jose, CA, Cadence is a leader in the electronic system design space. The company's Intelligent System Design strategy aids users to transform design concepts into reality by offering computational software, hardware and IP. Cadence's core electronic design automation software and services enable engineers to develop different types of ICs.

At present, CDNS carries a Zacks Rank #3 (Hold). In the past year, its shares have risen 25.5% compared with sub-industry's growth of 20.5%.

Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks worth consideration in the broader technology space are Badger Meter BMI, Arista Networks ANET and NVIDIA Corporation NVDA, sporting a Zacks Rank #1 (Strong Buy) each.

The Zacks Consensus Estimate for BMI's 2024 EPS is pegged at $3.89, which inched up 9.9% in the past 60 days. BMI's earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.7%. The long-term earnings growth rate is 15.6%. Shares of BMI have risen 27.9% in the past year.

The Zacks Consensus Estimate for Arista Network's 2024 EPS is pegged at $7.92, which moved north 6.2% in the past 60 days. The long-term earnings growth rate is 15.7%. ANET's earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 15.4%. Shares of ANET have risen 83.6% in the past year.

The Zacks Consensus Estimate for NVIDIA's fiscal 2025 EPS has increased 12% in the past 60 days to $26.84. NVDA's earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 18.4%. Shares of NVDA have risen 200.7% in the past year.

To read this article on Zacks.com click here.