Ansys to acquire Analytical Graphics for $700 million

Ansys just announced that it will acquire Analytical Graphics (AGI), maker of electronics simulation solutions for space applications, for a whopping $700 million, 2/3 of which will be paid in cash and the rest, through the issuance of Ansys common stock. To assemble the cash portion, Ansys plans to obtain new debt financing. For those of you keeping track, Ansys says that AGI “will add $75 million to $85 million of non-GAAP revenue to its 2021 results and will be modestly accretive to non-GAAP diluted earnings per share”. Many accounting things implied in that sentence, but I think considering the purchase price a 10x revenue multiple isn’t too far off.

Ansys says, “the acquisition will expand the scope of Ansys’ solution offering, empowering users to solve challenges by simulating from the chip now all the way to a customers’ entire mission – like tracking an orbiting satellite and its periodic connection to ground stations.” CEO Ajay Gopal adds, “Ansys’ acquisition of AGI will help drive our strategy of making simulation pervasive from the smallest component now through a customer’s entire mission. It will also expand the use of simulation in the key aerospace sector, where the stakes can be at their highest levels.”

My take: AGi’s space-related orbital and other niche simulations are only part of the story. AGI also offers something it calls “digital mission engineering”, which AGI defines as ” enabling a system integrator to redirect work from physical systems to their logical representations”. it’s a systems-based approach that’s underpinned by mission-specific tools and practices. For example, if you’re designing an aircraft system, AGI offers simulation, yes, but in the context of flight operations and aircraft performance, so the designer doesn’t have to (re)create that every single time. AGI says this can “shorten development cycles, streamline sustainment efforts, and enhance situational awareness. Connect model-based engineering to our mission analysis platform and achieve unrivaled speed”. AGI offers similar capabilities for missile systems, space systems, and more. I could see Ansys expanding this concept to its other industry verticals.

We’re going to learn more about the logic behind the acquisition at Ansys’ earnings call next week. Ansys expects the acquistion to close in Q4 2020.