The masses are atwitter over the announced Renesas acquisition of Altium, and for good reason. The $5.9 billion price tag is some real coin.
What’s less clear to almost everyone outside the two companies, however, is the underlying strategy and how the merged entity will look going forward.
In announcing the acquisition, Renesas chief executive Hidetoshi Shibata called it “an important first step into our long-term future.” But what is that future?
Obviously, Renesas is not going to take Altium private, for use for its internal customers only. The two firms do have many overlapping markets: IoT, consumer, automotive, among others. Renesas also plays in higher-end areas such as high-performance computing that Altium has not to our knowledge penetrated. If OEMs want one-stop shopping for a systems program, a combined Renesas-Altium starts to make some sense. But the latter lacks the chip package tool to complete the proverbial – and literal – circuit.
Less clear, however, is why Altium is worth so much to Renesas. Yes, it likely has as large an installed base as any major PCB CAD company. Its revenue, however, puts it behind Zuken in fourth overall, well behind Cadence and Siemens. Shibata highlighted Altium’s growth rates and profitability. But neither its revenue nor its net income ($43 million in its last fiscal year) will move the needle for Renesas.
As for the price: Renesas will pay $5.9 billion in the all-cash transaction. That’s a healthy premium relative to other significant deals in the industry over the past decade. I’m not of the mindset every deal must pay off in direct financial ways, but given the price tag, on the surface I think this one will be a tough climb.
That said, big deals are nothing new to Renesas. Including the pending Altium check, it has spent some $22 billion on various chip and software companies over the seven years.
How does this one rank with other high-profile M&As? Let’s look at some measures:
| Company | Prior 4Q Revenue at Acquisition | Acquisition Price | Stock Premium | Revenue Multiple |
| Cadence | $1.33B | |||
| Sigrity | $20M | $80M | na | 4x |
| Siemens | €79.6B (US$88.4B) | |||
| Mentor Graphics | $1.18B | $4.5B | 21% | 3.8x |
| Synopsys | $6B | |||
| Ansys | $2.16B | $35B | 29% | 16x |
| Renesas | $9.94B | |||
| Altium | A$263M (US$171.6M) | $5.9B | 34% | 22x |
Cadence bought Sigrity in 2012 for what now seems like couch change: $80 million.
The Ansys acquisition announced last month reportedly will increase Synopsys’ total addressable market by a 50% to $28 billion. While Synopsys is strictly EDA, Ansys plays heavily in the automation space, with focus on large end-markets like automotive, aerospace and industrial. Semi makes up less than one-third of Ansys’ revenue. (Asked on a conference call for how the Altium deal would affect Renesas’ TAM, the company demurred.)
This all can be traced back to Siemens’ 2017 acquisition of Mentor Graphics. Under duress after multiple hostile takeover attempts, including one by Cadence, Mentor was acquired by the German conglomerate as less than 4 times annual revenue. Synopsys is paying 16 times revenue for Altium, Renesas is paying more than 22 times revenue for Altium. How the CAD company’s former shareholders must be wishing they were still on the block now!
Renesas hinted that Altium shouldn’t be viewed in a vacuum but as part of a larger strategy. Will Zuken be next? At $250 million in revenues over the past four quarters, and a market cap of $630 million, it would likely be a far cheaper buy. And Zuken could add chip package and high-end PCB tools to the suite, while also bringing several major military and aerospace customers. Zuken has danced with others through the years. Might it someday find a new home with Renesas?