Cadence completes €2.7 billion acquisition of Hexagon D&E to boost Physical AI

Cadence Design Systems has completed the acquisition of Hexagon AB’s Design & Engineering business for approximately €2.7 billion, the companies said, marking a major strategic push into what Cadence calls the “Physical AI” market. The deal closed on Feb. 23, 2026 and is structured as 70% cash and 30% Cadence common stock; Hexagon said it received roughly 3.2 million Cadence shares as part of the consideration.

Cadence said the purchase price includes an estimated €150 million of transaction-related taxes owed by the acquired entities. The acquisition brings Hexagon’s MSC Software assets, including MSC Nastran™ and Adams™, together with Cadence’s multiphysics portfolio spanning electronics, computational fluid dynamics and BETA CAE structural tools. Cadence framed the combination as creating an end-to-end multiphysics simulation platform for applications from autonomous systems and advanced robotics to future transportation.

“This acquisition marks a major milestone in advancing our vision for intelligent system design,” Cadence CEO Anirudh Devgan said in the company release. “By combining our industry-leading computational software and AI-driven design expertise with MSC Software’s world-class structural and physics-based analysis technologies, we’re empowering customers to push the boundaries of what’s possible, from autonomous systems and advanced robotics to the future of transportation.”

Under its financial model, Cadence expects the incoming business to add about $160 million to 2026 revenue but to be roughly 28 cents dilutive to non-GAAP earnings per share in 2026, with the deal becoming accretive in 2027. Hexagon reported that the D&E unit contributed approximately 265 million euros to Manufacturing Intelligence revenue in 2024 and said the sale is expected to generate a gain of around 1.4 billion euros net of tax, transaction costs and currency impacts. Hexagon said it intends to use proceeds for general corporate purposes, possibly including de-leveraging and further acquisitions; it also reiterated that its planned separation of Octave remains on track for the first half of 2026 if approved.

Market reaction in the immediate press distribution showed Cadence shares trading lower in the feed; the Business Wire snapshot accompanying the release noted CDNS down about 4.3% and HEXA‑B.ST down about 1.2%, reflecting investor focus on near-term dilution and integration risk. The companies’ statements did not enumerate regulatory conditions or detailed integration timelines in their public releases.

The acquisition tightens consolidation in engineering simulation and electronic design automation, linking well-established structural and multibody dynamics engines with AI-driven system-level design tools. For customers, the companies pitch faster iteration cycles and more integrated multiphysics workflows that stitch together electronics, acoustics, structural analysis and fluid dynamics, capabilities increasingly important in safety-critical systems such as autonomous vehicles and robotics.

Analysts will watch whether Cadence can translate the purchase into the revenue and margin gains the company projects and whether anticipated accretion in 2027 materializes. Short-term investor concern centers on the reported 28 cents of non-GAAP EPS dilution for 2026 and on integration complexity across complementary but distinct product lines. Hexagon, meanwhile, moves from operation ownership to a large equity stake in Cadence and a one-time reported gain that management says will fund strategic priorities.