Hexagon Sells Design & Engineering Business to Cadence for €2.7 Billion

Hexagon's Strategic Move: Selling Design & Engineering Business to Cadence

In a significant development in the tech industry, Hexagon AB, a global leader in measurement technologies, has confirmed that it will divest its Design & Engineering (D&E) business to Cadence Design Systems, Inc., an undertaking valued at approximately €2.7 billion. This transaction marks a pivotal shift in Hexagon's portfolio strategy, allowing the company to sharpen its focus on core operations that center around data capture, measurement, and analytics.

Details of the Sale

The formal agreement indicates that Cadence will compensate Hexagon with a blend of stock and cash—30% of the purchase price will be disbursed in Cadence common stock, while the remaining 70% is set to be paid in cash. The transition signifies a transformative step for both companies. Hexagon's Chairman, Ola Rollén, shared insights on the move, stating that the sale represents a strategic pivot to streamline Hexagon's offerings while concurrently bolstering its financial agility. Rollén pointed out that the D&E business, which has thrived since Hexagon's acquisition of MSC Software in 2017, has begun transitioning effectively to a subscription-based model, which is crucial in the current market landscape.

Understanding the Market Dynamics

As the engineering simulation market evolves, Hexagon finds it challenging to keep pace with the rapid innovations emerging from electronic design automation (EDA) leaders. By transferring the D&E operations to Cadence—a recognized giant in the EDA sector—Hexagon expects to drive better service and collaboration for their customers while ensuring a robust future for employees and stakeholders alike. According to Anders Svensson, the President and CEO of Hexagon, this move also presents numerous opportunities for synergistic growth in Cadence’s Multiphysics System Analysis business segment, enhancing innovation and driving capital allocation more effectively across its product lines.

Financial Implications

From a financial standpoint, the D&E business has historically contributed around €265 million to Hexagon's Manufacturing division revenues in 2024, with a profitability level surpassing the averages of the Hexagon group. By executing this transaction, Hexagon not only anticipates a capital gain but also plans to utilize the proceeds for general corporate activities, including recapitalization and potentially funding future acquisitions aligned with their growth strategy. Financial specifics regarding the gain from this sale are expected to be disclosed in the third quarter of 2025.

As Hexagon offsets its reliance on D&E, it continues to maintain a significant presence in the software services sector, particularly where synergies with their sensor and robotic solutions are apparent. It’s noteworthy that, excluding both the D&E business and the upcoming separation of Octave, software services and recurring revenues could account for over 40% of revenues moving forward.

Looking Towards the Future

The anticipated closing of the transaction is slated for the first quarter of 2026, pending standard conditions and regulatory approvals. This decisive move reflects Hexagon's intent to sit at the helm of technological advancement and market leadership in their core offerings while adapting to the changing currents of engineering and simulation technologies. As the dust settles on this transaction, it will be intriguing to observe how both Hexagon and Cadence harness this opportunity for growth and innovation.

In conclusion, this sale not only restructures Hexagon's portfolio but also exemplifies the dynamic shifts in the tech landscape, signaling a future where companies must continually adapt to thrive. Keeping a keen eye on such developments is essential for stakeholders in the industry and investors alike.

For further insights and inquiries, reach out to Tom Hull, Hexagon's Head of Investor Relations, or Anton Heikenström, Investor Relations Manager. Their contact information is available for those interested in understanding more about this significant strategic maneuver.