Synopsys has decided to buy the number three design automation tools vendor Avant in a stock-for-stock deal worth $830m.
Aart de Geus, Synopsys CEO, said the move was triggered by his customers saying they would back the acquisition.
Avant has been hit hard by both criminal and civil lawsuits concerning the theft by some of its staff of source code belonging to Cadence Design Systems. After a series of court judgements, it has paid some restitution to Cadence, but Avant's future as an independent company has been in doubt ever since.
Avant is a good fit with Synopsys. Where Synopsys has a commanding share of the market for front-end synthesis tools, Avant has a sizeable market share in place-and-route and physical IC analysis software.
"The merger brings together the best front-end and the best back-end tools under the same roof," said de Geus.
"Many customers have said to me they would welcome such a move. It opens the door to a complete IC design solution. Shareholders will view this as a strong move when many customers are reducing the number of suppliers that they use."
Synopsys will have to pay $335m for a $0.5bn insurance policy against possible payments to Cadence that could result from a forthcoming civil case.
It also faces a $55m for severence payments to the Avant board, none of whom will join the Synopsys board. Gerry Hsu, Avant chairman, will leave once the deal is completed. Paul Lo, CEO, will continue at Synopsys during the integration of the two companies. "After that, I will plan my future," said Lo.
De Geus said: "Avant has had legal troubles. Some bad things occurred and Avant paid a huge price, not only a large restitution payment but suffered for years under a cloud of doubt and mistrust.
"We do not condone what happened in the past but we are convinced what we are acquiring today is clean."
Synopsys is also likely to face another $30m in banking fees to complete the acquisition.
If options are included, Hsu is expected to walk away from the deal with $40m. He is likely to profit from the Avant decision to buy its Japanese distributor Maingate, where he owns half the stock.
Avant is negotiating itself out of a series of deals with distributors that guaranteed them cash payments on a change in ownership.
Although the main focus of the acquisition is on Avant's place-and-route tools, including the recently launched Astro, a number of other tools will join the Synopsys portfolio.
There is some overlap in the field of IC floorplanning and synthesis but Synopsys will pick up a range of physical analysis tools, the mixed-signal simulator developed by Analogy and the Milky Way database.
At the Design Automation Conference in Las Vegas this year, where Cadence unveiled a plan to use its Genesis database as the integration layer for different vendors' tools, Synopsys said the Milky Way database was what customers were asking EDA vendors to base their offerings around. Avant hinted that it would open up access to competitors to the Milky Way format. With this buy, Synopsys will now gain control over Milky Way.
"The Milky Way database will be a key asset," said de Geus.
Despite the size of the merger, Cadence remains the largest EDA vendor by sales. However, Synopsys recently followed Cadence in boosting the number of subscription licences it sells, effectively deferring a large amount of revenue that would be reflected in immediate top-line sales. After the purchase, Synopsys expects to move Avant onto the same model, which will depress sales figures in the short term.
The Avant purchase will not affect Cadence's acquisition of Ikos. This should go through next year, said Brad Henske, Synopsys chief financial officer.