Cadence Acquires Hexagon's Engineering Unit for €2.7 Billion Deal

Engineering software leader Cadence expands multiphysics simulation capabilities through strategic acquisition of Hexagon’s MSC Software division

Key Takeaways

• €2.7 billion acquisition deal sees Cadence Design Systems purchase Hexagon’s Design and Engineering business, including MSC Software unit, in 70% cash and 30% stock transaction expected to close Q1 2026.
• Hexagon shares surge 6% following announcement as company streamlines portfolio to focus on core data capture and measurement capabilities while strengthening financial flexibility.
• Strategic consolidation accelerates in engineering software sector as Cadence builds comprehensive multiphysics platform to compete against Synopsys-Ansys combination, targeting $10+ billion simulation market growing 10% annually.

Introduction

Cadence Design Systems strikes a €2.7 billion deal to acquire Hexagon AB’s Design and Engineering business, marking a significant consolidation move in the competitive engineering software sector. The transaction, structured as 70% cash and 30% stock, brings MSC Software’s industry-standard simulation programs under Cadence’s expanding multiphysics portfolio.

Hexagon shares jumped over 6% on the announcement as investors welcomed the strategic divestiture. The deal represents Hexagon’s continued portfolio realignment toward core competencies in real-world data capture and measurement technologies.

Key Developments

The acquisition centers on MSC Nastran and Adams, critical simulation tools used across aerospace, automotive, robotics, and emerging physical AI applications. According to Investing.com, the Design and Engineering business generated approximately $280 million in revenue during 2024 with margins exceeding 30%.

The transaction transfers over 1,100 employees globally and builds upon Cadence’s $1.2 billion Beta CAE acquisition completed in 2024. This latest move accelerates Cadence’s Intelligent System Design strategy while expanding its presence in the multi-billion-dollar structural analysis market.

“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,” said Ola Rollén, Chairman of Hexagon’s Board.

Market Impact

The engineering software simulation and analysis market, valued at over $10 billion in 2023, continues attracting major consolidation activity. Industry growth projections indicate annual expansion rates of approximately 10% through 2028, driven by increasing complexity in system design requirements.

Cadence’s acquisition directly challenges the recent Synopsys-Ansys combination, intensifying competition for comprehensive multiphysics platforms. The deal positions Cadence to serve leading aerospace and automotive OEMs including Volkswagen Group, BMW, Toyota, Lockheed Martin, and Boeing, who rely on Hexagon’s simulation workflows for mission-critical applications.

Mizuho Securities analysts maintain their “outperform” rating with a $400 price target for Cadence, citing the company’s “enviable combination of industry-leading 42%+ operating margins with durable low to mid-teens revenue growth.”

Strategic Insights

The transaction highlights accelerating consolidation as engineering software companies pursue integrated electronic, mechanical, and software design capabilities. Cadence gains immediate access to proven CAE solutions while expanding its customer base across high-value industrial sectors.

For Hexagon, the divestiture creates financial flexibility for future acquisitions while sharpening focus on measurement technologies and real-world data applications. The Design and Engineering business contributed approximately 265 million euros to Hexagon’s Manufacturing division in 2024, operating above group average profitability levels.

MSC Software’s ownership history reflects ongoing industry transformation. Symphony Technology Group acquired the company in 2009 for $360 million before Hexagon’s 2017 purchase at $834 million, demonstrating sustained value creation in specialized simulation technologies.

Expert Opinions and Data

Anirudh Devgan, Cadence’s president and CEO, describes the agreement as “a fundamental step” in enabling customers to design complex converged systems. “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 behaviour—from electromagnetics and fluids to structures and motion,” he stated.

Anders Svensson, Hexagon’s President and CEO, emphasized synergistic opportunities: “D&E’s comprehensive portfolio of solutions is well positioned to support Cadence’s Multiphysics System Analysis business, with compelling opportunities for synergistic growth ahead.”

Mizuho analysts consider the deal “strategic and complimentary,” noting three valuation scenarios for Cadence. Their base case targets a FY26E EV/FCF multiple of approximately 60x, while bullish projections assuming 14% revenue growth could elevate valuations to 67x EV/FCF at $450 per share.

Analysts identify GenAI as a long-term secular tailwind, stating: “We expect double-digit EDA growth drivers to remain intact in the near term, with GenAI as a long-term secular tailwind.”

Conclusion

The €2.7 billion transaction establishes Cadence as a comprehensive multiphysics platform provider while enabling Hexagon’s strategic focus on core measurement capabilities. Both companies position themselves for sustained growth in their respective specialized markets.

The deal underscores the engineering software sector’s evolution toward integrated simulation ecosystems. Cadence now competes directly with industry giants through expanded structural analysis capabilities, while Hexagon strengthens its financial position for future portfolio optimization initiatives.