Ansys Inc has strengthened its dominant position in the simulation software sector by paying $577m in cash and shares for Fluent Inc, a Lebanon, New Hampshire-based company that uses computational fluid dynamics (CFD) techniques to enable engineers and designers to simulate fluid flow, heat and mass transfer.
With sales up 16.7% to $121.9m in 2005, Fluent is a major force in a dynamic market segment and marketing research firm Daratech Inc estimates that CFD simulation technology will show an annual growth rate of 18% through to 2009.
Canonsburg, Pennsylvania-based Ansys boasted that the deal will give it one of the most complete, independent engineering simulation software offerings in the industry. The combined company, which will employ approximately 1,350 people, will have over 40 direct sales offices and 17 development centers, on three continents.
The acquisition was announced along with Ansys annual figures which showed that net income in the fourth quarter rose 8.3% to $13.3m on revenue 12.4% higher at $43.7m. For the year, net income rose 27% to $43.9m on revenue 17.5% higher at $158m.
Behind the rapid growth rates of both Ansys and Fluent is a growingly competitive world market that has forced manufacturers to look to software to speed the passage of products to market.
But Fluent, in particular, has worked hard to simplify the use of its software to increase the number of licenses it can sell to each customer. It acknowledges that in the past, CFD was generalized software that required complex customization to be adapted for use within a particular industry. This restricted its use to upper level PhD caliber engineers.
But in the past few years, Fluent says it has worked to develop industry-specific tools that come with many pre-loaded templates that simplify its use. It says this has opened up the use of CFD software to a much broader range of skill sets.
Competition tends to come from industry-specific companies, such as Flomerics Plc in the electronics sector, and no-one will be able to boast the breadth of Ansys’ software range, which complements PLM (product lifecycle management) software. Moreover, many companies still use in house software, which gives a ready market for future growth.
Terms of the deal are for Ansys to pay $300m in cash and 6 million shares for Fluent. With the acquisition, which should close in the second quarter, expected to be accretive to earnings before special charges, Ansys shares rose 4.6% to $46.15 on the news.
Formed in 1983, Fluent Inc was acquired by Aavid Thermal Technologies Inc, which held an IPO in 1996. But in 2000, Aavid was purchased by private equity firm, Willis Stein & Partners. The deal is structured by Ansys buying Aavid and then spinning out the hardware side of the business, Aavid Thermalloy back to Willis Stein.