Earlier in this series, we discussed how acquisitions are one of the key growth drivers for Cadence in the recent years. Cadence made several acquisitions in the past three years in order to strengthen its intellectual property (or IP) and verification portfolio. In this part of the series, we’ll take a closer look at several of Cadence’s recent acquisitions.
Tensilica acquisition strengthened Cadence’s IP portfolio
In April 2013, Cadence acquired Tensilica, which had a leadership position in configurable dataplane processing IP. Tensilica’s offerings include optimized IP subsystem solutions for wireless mobile, network infrastructure, auto infotainment, and home applications. After accounting for certain costs and Tensilica’s cash balance of $26.3 million, total cash consideration came to $319.3 million, which was financed entirely through a combination of internal cash flows and existing cash balance. The acquisition is set to bring in incremental revenues of ~$60 million.
The acquisition complements Cadence’s IP solutions, and the combined entity is better placed to provide complete SoC solutions. These solutions should aid in the development of differentiated products with programmability advantages, while reducing time to market.
The acquisition adds over 200 licensees, including several top names in the semiconductor space such as Intel (INTC), Qualcomm (QCOM), Samsung (SSNLF), and Taiwan Semiconductor Manufacturing Company (TSM). Tech giant Microsoft (MSFT) utilizes Tensilica’s processors in its Xbox One gaming console audio subsystem.
Acquires leading provider of formal analysis solutions
In June 2014, Cadence completed the acquisition of Jasper Design Automation, a privately held provider of formal analysis solutions. Jasper Design is the market leader in the fast-growing sector of formal analysis, and the business combination strengthens Cadence’s system design and verification offerings. The transaction was entirely financed through cash on hand for a total consideration of $139.4 million.
Cadence’s business performance is correlated with that of the semiconductor sector. Investors seeking to gain exposure to the semiconductor sector can consider a pooled investment vehicle such as the VanEck Vectors Semiconductor ETF (SMH). SMH’s top two holdings are INTC and TSM, which together make up ~35% of the ETF.