Cadence expands CAE portfolio with $3.25B MSC Software deal

Cadence announced yesterday that it will acquire Hexagon’s Design and Engineering (D&E) business—including MSC Software—for €2.7 billion (~$3.25 billion). The deal is a mix of cash (€1.89 billion) and stock (€810 million), valuing the business at roughly 10x revenue. For the first time, Hexagon disclosed that D&E generated $280M in 2024 revenue.

Cadence has been steadily building out a broad CAE portfolio since 2019, starting with Celsius for its thermal solver and CFD solution. Then, in 2021, it added NUMECA ($200 million, CFD) and Pointwise ($31 million, meshing) and in 2023, BETA CAE ($1.2 billion, pre- and post-processors). Along the way, it has been snapping up opportunistically, for signal integrity, electromagnetics, molecular modeling, HVAC for data centers, and more—broadening into new physics and industries. This push took Cadence beyond its legacy in electronics industries into automotive, aerospace, marine, and power generation.

What does MSC add to this party? Clearly, MSC Nastran and Adams, the flagship FEA solver and muti-body dynamics solutions. Cadence, in its statement, said that the deal includes “an impressive portfolio of highly complementary solutions in multiphysics analysis, system dynamics, metal forming, and autonomous driving simulation.” I have asked Hexagon whether the following are also included in the deal: Digimat and MaterialCenter (respectively for multi-scale modeling and managing and accessing material data), Geomagic (for reverse engineering, inspection, and design), CADLM (the ODYSSEE acquisition from 2021, which applies AI to sensor data and simulation results), and the various other bits it has acquired over the years for autonomous vehicle simulation. We’ll see what I hear back.

In any case, Cadence just bought a boatload of name brands to add to its offer for the new verticals it most wants to be in.

But it’s not all clear sailing for Cadence. I am told that Hexagon had underinvested in MSC’s core technology in favor of its Nexus platform strategy and the MSC Apex concept, multi-purpose CAE targeted at less-expert users. Cadence may have to do some catch-up investment to bring the legacy portfolio back to a leadership position.

And what about Hexagon?  What’s left? Former Hexagon CEO Ola Rollén, who spearheaded all of these acquisitions and is now Chairman of the Board, said, “[This] 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 … However, the engineering simulation market is evolving rapidly, with electronic design automation suppliers increasingly taking a leading role, a trend which is harder for Hexagon to follow. By transitioning D&E to Cadence, a global leader in this field, and establishing a long-term collaboration between our companies, we are creating a stronger future for our customers, employees, and shareholders.”

It is not wise to argue with Mr. Rollén. Still, he made one point with which I must disagree: “Our D&E business … has delivered strong results since we acquired MSC in 2017, over which time we have been successfully transitioning the business to a subscription model.” When Hexagon acquired MSC Software, it had been through the wars. Missteps had taken it from a powerful player in CAE, as a publicly traded company, to a private equity buyout. In 2017, when Hexagon acquired MSC, it paid $834 million for a company that had generated revenue of $230 million, “with strong profitability and a high percentage of recurring revenue.” Yes, the software world in 2017 was very different from today’s, and the transition to subs is never easy. Still, that’s just a CAGR of around 3% over the near-decade we’re discussing, while adding numerous brands and capabilities to the portfolio. The CAE market overall grew at 7% or more, depending on how you measure, over that same period. Anyway.

Cadence sounds truly excited about this acquisition. CEO Anirudh Devgan said, “Cadence has long been at the forefront of innovation in computational software for semiconductors and electronic 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 behavior—from electromagnetics and fluids to structures and motion.” The press release continued, adding D&E to its current offering will enable it to “serve a broader customer base, including leading aerospace and automotive OEMs and Tier 1 suppliers such as Volkswagen Group, BMW, Toyota, Lockheed Martin, BAE and Boeing, among others, who use Hexagon’s D&E solutions for mission-critical simulation workflows.” That’s a very impressive list of new accounts Cadence gets to call on.

The transaction is expected to close in the first quarter of 2026, subject to customary closing conditions and regulatory approvals. And we’ve seen how that’s been going lately … Stay tuned.

TL;DR. MSC will be part of Cadence, along with many other cool technologies. Did I see this coming? Maybe. Cadence has been in the running for many of the recent CAE deals, so that it acquired something this big is not surprising. Did Hexagon intend to sell MSC? To the right buyer, probably — the company is reinventing itself, and this was a somewhat unwanted child, that was still more core to the continuing manufacturing-focused business than the former PPM. Could it have held on to this asset and made something of it? Probably, with the renewed focus on manufacturing. But as new Hexagon CEO Anders Svensson said, the deal enables Hexagon to deploy capital “across our sensor portfolio and remaining core software businesses” — specifically, the CAM and metrology parts of the business.

All that said, Cadence is a great new home for MSC Software and its people. I hope this deal goes through; too many CAE brands have languished or vanished and I don’t think that will happen in this case.

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The title image is actually from Hexagon of Patran, MSC’s pre- and post solution, which wasn’t mentioned in either company’s press materials, but is an integral part of the MSC offer. The image is of a mesh generated using Patran with Nastran results superimposed on it from https://hexagon.com/products/patran — isn’t it gorgeous!