Synopsys to sell Software Integrity Group to Clearlake Capital and Francisco Partners for up to $2.1bn

Synopsys, Inc. (NASDAQ: SNPS) has entered into a definitive agreement to sell its Software Integrity Group to global private equity firms Clearlake Capital Group, L.P. (“Clearlake”) and Francisco Partners. The transaction, valued at up to $2.1 billion, includes a contingent payment of up to $475 million in cash, dependent on the buyer’s achievement of a specified return rate. The deal marks a significant realignment for Synopsys, focusing more intently on its core areas of silicon and system engineering.

This strategic divestiture will see the Software Integrity Group reestablished as an independent entity, specializing in application security testing software. The existing management team is slated to continue leading the new company, whose name will be announced post-transaction. Synopsys is committed to ensuring a smooth transition for the team, its customers, and partners, with the transaction expected to close in the second half of 2024, pending customary regulatory approvals.

Sassine Ghazi, President and CEO of Synopsys, commented on the divestiture, stating, “Clearlake and Francisco Partners have a strong track record of success investing in growing software platforms and are ideal partners to continue growing this business as an independent, world-class software security provider. For Synopsys, this move sharpens our focus on the unprecedented, high-growth opportunity we have in our core business.”

The sentiments were echoed by Dipanjan “DJ” Deb, Co-Founder and CEO of Francisco Partners, who noted, “We are excited to partner with Synopsys to complete the carve-out of its Software Integrity Group, a leading provider of application security testing solutions. Francisco Partners has a long history of working with leading technology companies to carve-out divisions and business units that can benefit from greater focus and flexibility as standalone entities.”

Behdad Eghbali, Co-Founder and Managing Partner of Clearlake, emphasized the growing importance of security in software development, particularly with advancements in generative AI technologies that are poised to revolutionize the software development lifecycle. He stated, “As security becomes more embedded in DevOps workflows, we believe the demand and importance of application security testing providers will continue to rise.”

Advisors for the transaction include J.P. Morgan and Cleary Gottlieb Steen & Hamilton for Synopsys, with Evercore, Deutsche Bank, Barclays, Sidley Austin, and Simpson Thacher & Bartlett advising Clearlake and Francisco Partners.

This divestiture reflects a strategic sharpening of focus for Synopsys, allowing it to concentrate on its core competencies while enabling the Software Integrity Group to thrive under new ownership that is experienced in fostering growth in specialized tech sectors. This should enable both entities to better navigate the rapidly evolving tech landscape, particularly in areas of AI and system design.