SUNNYVALE, Calif. - Synopsys, Inc. (NASDAQ: NASDAQ:SNPS), a leader in silicon to systems design solutions, has announced a definitive agreement for the sale of its Software Integrity Group to private equity firms Clearlake Capital Group, L.P., and Francisco Partners. The deal, valued at up to $2.1 billion, will establish the Software Integrity Group as a separate, independent application security testing provider.
The transaction, unanimously approved by Synopsys' Board of Directors, is slated for completion in the second half of 2024, pending customary closing conditions and regulatory approvals. The sale includes a cash payment of up to $475 million, contingent upon the private equity firms achieving a specified return rate.
Synopsys President and CEO Sassine Ghazi commented on the divestiture as a strategic refocusing on the company's core businesses, emphasizing the growing opportunity in silicon and systems engineering. The Software Integrity Group's current management team is expected to continue leading the business post-sale, with the new company's name to be announced later.
Private equity firms Clearlake and Francisco Partners expressed their enthusiasm for the acquisition. Clearlake Co-Founder Behdad Eghbali highlighted the increasing integration of security in DevOps and the potential for operational enhancements using their O.P.S.® framework. Francisco Partners Co-Founder Dipanjan "DJ" Deb noted their history of fostering growth in carved-out technology divisions.
The Software Integrity Group, recognized for its comprehensive application security testing solutions, is poised to operate independently, focusing on the growing need for secure and compliant software development in the face of emerging risks such as generative artificial intelligence.
Financial advisory roles were filled by J.P. Morgan for Synopsys and by Evercore, Deutsche Bank, and Barclays for the private equity firms. Legal advisement was provided by Cleary Gottlieb Steen & Hamilton for Synopsys, while Sidley Austin and Simpson Thacher & Bartlett served the buyers.
This news is based on a press release statement.
InvestingPro Insights
As Synopsys, Inc. (NASDAQ: SNPS) moves forward with the strategic sale of its Software Integrity Group, investors and stakeholders are keenly observing the company's financial health and market position. According to InvestingPro real-time data, Synopsys boasts an impressive market capitalization of $81.91 billion USD, reflecting its significant presence in the design solutions industry.
One of the key InvestingPro Tips for Synopsys is its notable gross profit margin, which stands at a strong 80.58% for the last twelve months as of Q1 2024. This high margin is indicative of the company's efficient operations and strong pricing power within its sector. Additionally, the firm's operating income margin for the same period is 22.98%, further showcasing its profitability.
While Synopsys trades at a high earnings multiple, with a P/E ratio of 58.69, it is important to note that the company has been profitable over the last twelve months and analysts predict it will remain profitable this year. This is a testament to the company's sustained performance and the potential for future growth, despite the high valuation multiples that may concern some investors.
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