TSP Weekly Tech Stock Update—Dec 30, 2023

This Week: Top small-cap buyout candidates, cybersecurity plays for 2024, software consolidation is a key 2024 theme, ZS/NTNX/HUBS/GOOGL hit new 52-week highs, Snowflake's next growth driver and more.

Hello from Rob…

—There’s been a lot of chatter recently about potential M&A in the tech sector. Moving into 2024, we could see a spike in the number of deals. RBC Capital believes big tech vendors with large cash balances, high margins and/or slowing growth could increase their M&A activity next year.

Bloomberg recently reported that Ansys (ANSS, $362.88), a provider of engineering simulation software, is exploring its options after receiving takeover interest. Potential buyers would be attracted to the company’s rising exposure to the tech sector (representing 31% of total ACV) and its large presence in the aerospace/defense sector (22% of total ACV). It’s notable that Ansys in early December announced that CFO Nicole Anasenes would leave the company in Q2 2024.

Reuters reported that Synopsys (SNPS, $514.91–-Mkt cap: $78.2 billion) is in talks to acquire Ansys. Over the past five sessions, Ansys stock has rallied 20% on takeover speculation. With Ansys’ market cap now up to $31.5 billion, there’s plenty of buyout premium already in the stock price. Of course, no deal is guaranteed and Ansys may decide to remain independent.

*Inside This Issue: 4 potential takeover targets in the TSP Small-Cap Portfolio.

—Paid subscribers will receive the January 2024 PDF of Tech-Stock Prospector (TSP #263) via email on Tuesday, January 9.

—Paid subscribers have access to the TSP Market Overview and TSP Portfolio Updates sections inside this issue.