We’ve seen several acquisitions in the past month or so…and wanted to get a sense of what these purchases might or might not indicate about where EDA is going. So we went to the premier visionary and investor to get his take on how the EDA world will be affected by this apparent consolidation.
Ed: What do these acquisitions over the past month or so mean to EDA?
Jim: I like the Atrenta NextOp acquisition for several of points of view. In my world mergers are successful in EDA if:
1. there is no product overlap
2. the sales channel can immediately sell the product. Usually this means that the AEs support it or at least will be product within 30 days of purchase.
There is a ton of synergy with the Atrenta sales channel. This is important to ensure the ROI is met, typically a two to three year process.
3. customers support the merger. In other words, they see that the product is going to be continued to be supported with R&D and AEs.
4. the team remains at least two years to ensure intellectual property transition. In the case of Atrenta and NextOp, I believe all conditions are being met. Thus I expect a successful integration of NextOp and ROI.
In addition it speaks to Atrenta’s forward progress to being an IPO candidate. One issue for EDA is that companies exiting over the last ten years have been through acquisition. If we can see an IPO of a well-run and well-performing company, it attracts the attention of shareholders but also ensures an exit other than acquisition for other EDA companies. This will attract investors and thus we’ll see startups funded. This is a win-win for the entire ecosphere including customers.
I believe one of the key ingredients in an EDA company going public besides top line revenue of greater than $50m with 25% CAGR and margin of $10m or greater is the ability of the management team to acquire and integrate complementary startups. With Atrenta acquiring NextOp, I believe they are on their way.
Good luck to them because their IPO will be good for EDA by bringing excitement and notice to the sector.
Lee PR does work for Atrenta