Yesterday ANSYS (NYSE: ANSS) announced that they had signed a definitive agreement to purchase our client, Esterel, for euro 42 million, subject to certain working capital adjustments at close. ANSYS and Esterel did not have a preexisting relationship. Through the course of the process they developed a relationship of trust and respect, and built a compelling plan for the future. Together they will change an industry – but before I get into that, I want to touch on the transaction itself.

Esterel had in its investor group some of the most visionary and successful VC investors in Europe (CDC Innovation Group, Galileo Partners, ACE Management, Intel Capital), all of whom will receive a healthy return on their investment. A successful exit paves the way to raising the next funds, and also encourages partners and LPs to place bets on the next generation of companies.

Esterel’s management team survived all of the trials by fire that upstart innovators endure when they compete with entrenched giants a hundred times their own size. It is hard to build something new. It is even harder when you are trying to take market share away from legacy companies with longstanding customer relationships. The Esterel team worked incredibly hard, made smart decisions, and stayed the course. They have earned this.

Acquiring companies does not come lightly to ANSYS; they are one of the most disciplined and unified companies in the industry (which is how they continue to exceed analyst growth expectations, while sustaining the highest profit margins in the industry). However, the fit with Esterel is compelling. Already a leader in simulation for hardware, ANSYS now has a product suite that includes embedded system design, simulation, and code generation. They are now prepared to advance the state of the art in embedded systems.

The iPhone and iPad have put a cheap, responsive, high-res face on technology. Software in an industrial setting is much different. Programming languages from the earliest days of computing are still in use. Code is compiled, tested on hardware mockups, changed, recompiled, tested again. New code is then written for production versions of hardware. The new code is tested, rewritten, tested again. It is a cumbersome, expensive, error-prone process. There is a better way.

Without going into too much detail, imagine this scenario: Starting with a simulation of a helicopter, the programmer creates a model for what all the software systems should do – from the simple adjustments of lighting and cabin heat, to the more complex and critical functions controlling rotor blade pitch avionics and cockpit displays. The simulation is now complete and can be tested across all dimensions. If changes to the software are necessary, the model is adjusted. When the simulation tests out ready, the software is compiled from the model.

This vision has existed in the market for over a decade. Every embedded software company has stacks of old presentations promising model-based design, simulation and code generation. The difference is that Esterel actually did it, and did it on a grand scale.

We congratulate our client Esterel on the realization of its vision, and ANSYS on embarking on a partnership with the potential to change an industry.