Working in recruitment in the CAE (Computer Aided Engineering) Software space, I’ve been in the unique position over the last 4 years or so to be able to take an objective look over the market as a whole, and have witnessed a huge amount of change across the whole industry – largely as a result of M&A and inorganic growth.
All signs are pointing to this continuing too, as the CAE market is anticipated to grow from $5.23billion (2015) to $12.8billion in 2025.
Information taken from Grand View Research
So, why the booming market? In a word, technology. This growth is substantiated by a surge in wearable technology, smartphones, tablets, IoT and cloud computing, all of which have massively boosted the appeal and variety of applications for CAE software.
In terms of industry, it’s the automotive market, followed by the aerospace industry, that has led the charge for CAE software and the application of the software to analyse the effects of heat dissipation through aerodynamics, cooling and ventilation will help sustain the dominance of the transport industry.
CAE software in action
When it comes to M&A activity, over the course of the last few years, we’ve seen two of the leading CAD (Computer Aided Design) companies lead the way in major acquisitions in the space.
The acquisitions of CD-adapco in May 2016 and Mentor Graphics in March 2017 by Siemens for $970M and $4.5B respectively had a massive impact on the landscape of the market, so much so that I’ve spoken with candidates who want to avoid working for large, complex organisations, and have ended up working for Siemens 3 times in the last 5 years!
It’s not just Siemens though – another huge, and more recent incident of CAD on CAE acquisition came when Dassault Systèmes announced the acquisition of Exa Corporation for $400M in September of this year. Once again, this really got people talking, and companies looking over their shoulders.
Such is the proliferation of M&A across the sector though, those CAE focussed companies inhabiting the next tier down in terms of revenue, have also massively ramped up their inorganic growth strategies in the last 2 years, as the below graph demonstrates.
Information taken from crunchbase.com
I’m hesitant to call companies like ANSYS ($988M rev), Altair Engineering ($313M rev), MSC Software ($230M rev) and ESI Group (€140M rev) small, but the combined activity of those organisations and the previous movements from Siemens and Dassault has created a real feeding frenzy, meaning that no one is safe from acquisition – in fact MSC were acquired themselves earlier in 2017 for $834M by Hexagon.
In terms of aggression then, we’re right at the top of the hype curve of M&A, and with the anticipated market growth, it doesn’t show any signs of slowing down. The leading CAE and CAD companies are now locked in a fiercely competitive arms race to snap up the latest and greatest technology and, as a result, offer the most comprehensive CAD/CAE portfolio to their clients.
One interesting trend has been the moves of European based businesses (Dassault, Siemens, Hexagon) looking to move into the US market with their acquisitions, which means that we could see a shift from a traditionally US dominated market into a European controlled space in the coming years.
The next question is who’s next? Well, from my analysis of the market I believe that comparatively small businesses like COMSOL, Numeca, Optis World and Phoenix Integration could all be targets, as could Romax Technology and SimScale. Could MathWorks, who buck the M&A trend completely, make an acquisition for the first time in 10 years since Polyspace?
We could also see another traditional CAD vendor like PTC or Autodesk swoop in for Altair Engineering, as one of the only mid-sized companies left. Alternatively, by taking their competition out of the equation, a Siemens or Dassault could further solidify their status at the top of the CAx food chain.
In my role, M&A can be a double-edged sword – on the plus side, uncertainty means that a group of great candidates are often on the market and interested in new opportunities. I’m always more than happy to speak with them about new opportunities, however, we can spend time building fantastic relationships with smaller companies, only to be hit with a strict preferred suppliers list when they’re acquired by a bigger player.
However, that’s all part of the job, and another reason why it’s so exciting to be working in such a fast-moving industry. Having worked in the market, I’d really like to know is what it’s been like from your perspective? Has it been an exciting or worrying time if you’re working for a smaller player? Have I missed any major acquisitions that you think have changed the market? Let me know in the comments!
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