AI and digital twin specialist Cadence has acquired Hexagon's design and engineering (D&E) business in a deal worth approximately €2.7 billion.

Under the terms of the agreement, payment for the transaction will comprise 70 per cent cash and 30 per cent through the issuance of Cadence ordinary shares to Hexagon, Cadence said.

Hexagon's D&E division, which includes MSC Software, is a leader in computer-aided engineering (CAE) and simulation technologies.

The agreement will complement Cadence's system analysis portfolio for the automotive, aerospace, industrial and robotics sectors, as the company continues to drive its expansion in physical AI and system design and analysis, as confirmed by the company on Thursday.

The business, which generated approximately $280 million in revenue in 2024 and has more than 1,100 employees across multiple global sites, brings a portfolio of highly complementary solutions in multiphysics analysis, system dynamics, metal forming and autonomous driving simulation, Cadence said.

The deal will enable Cadence to serve a broader customer base, including leading aerospace and automotive OEMs and first-tier suppliers such as Volkswagen Group, BMW, Toyota, Lockheed Martin, BAE and Boeing, which use Hexagon D&E solutions for mission-critical simulation workflows.

The company noted that customers are increasingly seeking seamless engineering workflows, and the addition of Hexagon D&E's renowned mechanical solvers will enable Cadence to offer a comprehensive, unified, end-to-end multiphysics platform.

Anirudh Devgan, president and chief executive officer of Cadence, said the agreement represents "a fundamental step" in enabling Cadence customers to design the complex converged systems of the future.

"By adding Hexagon's D&E world-class simulation capabilities, we will expand our vision of Intelligent System Design to encompass the full spectrum of physical behaviour—from electromagnetics and fluids to structures and motion," Devgan said.

The transaction is expected to close in the first quarter of 2026, subject to regulatory approvals and customary closing conditions.

The acquisition of the Hexagon division follows the purchase of Beta CAE Systems in June 2024, an engineering simulation software company specialising in computer-aided engineering (CAE).

With a strong presence in the automotive, aerospace, industrial and healthcare sectors, Cadence said the move would strengthen its capabilities in multiphysics system analysis.

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