Hexagon stock jumps 6% on €2.7 bln Cadence deal for MSC Software business

Investing.com -- Hexagon AB (ST:HEXAb) shares rose more than 6% on Friday after Cadence Design Systems (NASDAQ:CDNS) announced a €2.7 billion deal to acquire Hexagon’s Design and Engineering business, including its MSC Software unit. 

The transaction, structured as 70% cash and 30% stock, is expected to close in the first quarter of 2026.

The acquisition brings MSC Nastran and Adams, simulation programs considered industry standards in structural and multibody dynamics. 

These tools are widely used in aerospace, automotive, robotics and emerging areas of physical AI, where precise modeling of real-world interactions is increasingly essential. The business generated about $280 million in revenue in 2024 with margins above 30%.

Cadence said the purchase builds on its $1.2 billion acquisition of Beta CAE in 2024 and strengthens its presence in the simulation and analysis market, valued at more than $10 billion in 2023 and projected to expand at about 10% annually through 2028.

Analysts at Mizuho Securities described the deal as “strategic and complimentary” to Cadence’s portfolio, adding that the combination enables the company “to deliver a more comprehensive, unified, end-to-end multiphysics platform.” 

The brokerage also noted it positions Cadence more competitively against Synopsys, which recently completed its purchase of Ansys.

Mizuho reaffirmed its “outperform” rating with a $400 price target, citing the company’s profitability and growth profile. 

“Cadence presents an enviable combination of industry leading 42%+ operating margins with durable low to mid-teens revenue growth,” the analysts said.

Mizuho outlined three valuation cases for the stock. Its base case projects a FY26E EV/FCF multiple of about 60x, supporting the $400 price target. 

A bull case envisions revenue growth of roughly 14% in 2026, raising the target to $450 at around 67x EV/FCF. A bear case assumes revenue growth of less than 10%, cutting the target to $275 at about 38x EV/FCF.

MSC Software has shifted ownership several times over the past two decades. Symphony Technology Group acquired it in 2009 for $360 million before selling it to Hexagon in 2017 for $834 million. 

Its latest sale underscores growing consolidation among engineering software providers as companies pursue tighter integration of electronic, mechanical and software design tools.

Mizuho flagged risks to Cadence’s outlook, including high research and development costs for computational software, cyclical semiconductor markets, restructuring efforts at Intel and broader macroeconomic pressures. 

Still, the analysts pointed to secular drivers supporting electronic design automation. “We expect double-digit EDA growth drivers to remain intact in the near term, with GenAI as a long-term secular tailwind,” the brokerage said.