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Consolidation Happens!

Nazita Saye

Nazita Saye

Posted Feb 23, 2011
0 Comments

The CAD/CAM/CAE market has been fairly stable over the past few years – we get a merger to two every few years. But over the past couple of months we’ve seen a couple of acquisitions. While one acquisition in a quiet market is interesting, two may be the beginnings of a trend. So I thought we could look at the recent developments from the perspective of you – the end-user of technology — and how they may or may not affect the return on your CAE investment.

Before we delve into the recent spate of mergers, I thought it might be interesting to look at the reasons why acquisitions happen in the first place.  Here are a handful of reasons:

  • Due to an economic downturn the market can’t handle multiple vendors. So the big fish (the ones with the better cash flow and deeper pockets) manage to snap up the smaller fish. This process continues until the SEC (or another governing body) steps in. I guess we can call this the survival of the fittest.
  • A company decides that it wants to strengthen its presence in a specific market or sector. This decision may be due to competitive reasons. Therefore, they acquire niche players which provide the company with the needed functionality so they could compete more effectively. Alternatively, a company notices a shift in product development trends; therefore, it acquires another product /company outside its usual market to expand or even diversify its offerings to match the trends.
  • A company has grown so large that the only way it can show aggressive growth is by acquiring other companies. By adding the revenue of the acquired company to its bottomline, the company shows investors impressive growth figures.

In my opinion, the first two years after acquisition are critical. During this period, the two companies need to learn how to work with one another, merge functions, put in new processes/procedures, create new product development roadmaps etc. And unfortunately during this critical time, some companies become so focused on internal operations that they forget to take care of new sales and their customer base.  This is why some companies experience a dip in revenue post acquisition – they quite simply take their eyes off the ball.

So let’s now talk about the recent acquisitions.

In January, Altair announced that it was acquiring Acusim. While I can only assume _why_ specifically Altair decided to acquire Acusim, in the long run one would hope that Acusim customers will get to benefit from the pre- and postprocessing prowess of Altair and Altair customers get additional CFD functionality.  And just last week Autodesk announced that it was acquiring Blue Ridge Numerics (BRNI). Autodesk has been on an acquisition path over the past few years… within the CAE sector, they have acquired Algor and Moldflow as well. Their strategy is easy to understand. They have faced stiff competition from other CAD companies which offer various integrated analysis capabilities. Therefore, they are trying to fill-in the proverbial holes so to speak.  While I can only guess what their long-term plan might be, their short term plan is clear – they continue to offer each tool separately to their customer base. And if I were to hazard a guess as to their long-term plan, I would say it would consist of fully integrating all these products into one cohesive one. But the likelihood that they’ll be able to deliver on this vision in the next 12 months is very small – each one of these products have their own legacy development issues so you couldn’t easily mix/mash them into one product family with a single interface.  Another thing that is also clear is that both these organizations, Acusim and BRNI are now facing the critical 2 year period of adjustment, reorientation and planning. So what does this mean for you?

Consolidation normally means fewer choices for the consumer. And if you end up with too few choices, some vendors could take advantage of the situation by creating a cartel and hold everyone to ransom.  Knowing what I know about the CFD industry, most of the guys seem to be pretty gentlemanly. So the likelihood that prices will go through the roof is not too high.  Therefore, if you’re in the market to buy a CFD solution, I’d say you still have plenty of viable options out there.

If you are using either Acusim or CFDesign, you most certainly have the option of waiting to see what happens during the next couple of years.  Based on my personal observation, when a company gets acquired they tend to get dissolved into the parent company. I remember back in the mid 90s when RASNA got acquired by PTC. RASNA’s Mechanica was a pretty popular product and you’d see them used alongside many CAD products. But within a few short years after the acquisition, you’d be pressed to find Mechanica at sites using other CAD tools. Whether that was by design or accident, it happened. You might say, ah but Flomerics got acquired by Mentor Graphics so does that mean that FloEFD, FloTHERM and FloVENT will disappear from non Mentor sites? Well, the answer is a resounding no! We were acquired more than 2.5 years ago and thankfully the Mentor Graphics management team realized pretty early in the game that our CFD solutions can be used for a lot more than just electronics cooling.  If anything, they’ve actively encouraged us to continue growing in all fields… not just electronics.

In short, consolidation happens. But if you’re concerned or simply want to explore some of your options, give us a call at Mentor Graphics.  They say there’s no change without pain but you don’t always need to feel pain to change for the better.

Until next time,
Nazita

PS.  All product names mentioned in this post are trade names or trademarks of their respective companies.

CFD, CFdesign, Acusim, FloVENT, FloEFD

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About Nazita Saye

Nazita SayeI have been involved with the CFD user community in one shape or another since 1999 -- when the NIKA team first introduced FloWorks to the engineering community. Over the years I've seen the market evolve and I still marvel at the wide range of products that are being designed with our tools. As the Manager of External Communications for the Mechanical Analysis Division at Mentor, it is my privilege to bring some of our customer stories to you. Visit CFD doesn’t mean Color For Directors

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