Hexagon’s Strategic Divestiture and Its Implications for the Engineering Simulation Market

Hexagon AB’s recent strategic divestitures and restructuring efforts underscore a calculated shift in capital allocation and sector positioning, with profound implications for the engineering simulation market. By offloading non-core assets and refocusing on high-growth domains, the Swedish industrial software giant is accelerating industry consolidation while unlocking value for stakeholders.

Capital Reallocation: From D&E to Core Competencies

In September 2025, Hexagon finalized the sale of its Design & Engineering (D&E) business—including the former MSC Software division—to Cadence Design Systems for €2.7 billion, with 30% paid in Cadence stock [1]. This transaction, which generated immediate liquidity, reflects Hexagon’s intent to streamline its portfolio. The D&E unit, while profitable (contributing €265 million in 2024 revenues and outperforming Hexagon’s group averages [1]), no longer aligned with the company’s strategic emphasis on measurement technologies and autonomous solutions.

The sale also signals a broader trend in the computer-aided engineering (CAE) market. Cadence’s acquisition of D&E—building on its earlier Beta CAE Systems purchase—strengthens its position in structural analysis and multiphysics simulation, a $2.5 billion segment projected to grow as industries adopt digital twins and AI-driven design tools [2]. By exiting this space, Hexagon cedes a mature market to a consolidator while redirecting resources toward higher-margin, tech-driven opportunities.

SIG Divestitures: Refocusing the Geospatial Playbook

Hexagon’s July 2025 divestitures within its Safety, Infrastructure & Geospatial (SIG) division further illustrate its focus on core competencies. The company sold U.S. Federal IT services, geospatial data production, and ruggedized hardware assets to Bart & Associates (B&A), generating €90 million in 2024 revenues [3]. While the transaction value remains undisclosed, the move allows SIG to concentrate on its fast-growing public safety business and prepares the division for potential separation as part of Hexagon’s broader spin-off strategy [4].

This reallocation aligns with the GIS market’s trajectory. According to Mordor Intelligence, the global GIS market is expected to expand at a 14.2% CAGR from 2025 to 2030, driven by smart city initiatives and cloud-native platforms [5]. By shedding lower-margin service lines, Hexagon positions SIG to capitalize on these trends without diluting its software-centric innovation.

The ALI Spin-Off: A NewCo for a New Era

Hexagon’s most transformative move is the impending spin-off of its Asset Lifecycle Intelligence (ALI) division into a standalone entity, NewCo. This entity will integrate SIG, ETQ, and Bricsys, forming a software and SaaS company with €1.45 billion in 2024 revenues and a 31% adjusted operating margin [6]. The separation, slated for a U.S. stock exchange listing in early 2026, aims to unlock value by allowing NewCo to pursue its own growth strategy in asset lifecycle management, safety, and geospatial intelligence.

The spin-off mirrors a broader industry pattern: the fragmentation of large industrial software conglomerates into specialized entities. For Hexagon, this move reduces complexity and enables targeted reinvestment in its remaining core—measurement and autonomous solutions—while NewCo can aggressively pursue AI-driven digital twin applications in infrastructure and public safety.

Sector Consolidation and Investment Implications

Hexagon’s divestitures and spin-off are accelerating consolidation in the CAE and GIS markets. Cadence’s D&E acquisition exemplifies the trend of tech firms building end-to-end simulation platforms, while NewCo’s formation reflects the sector’s shift toward niche, high-growth SaaS models. For investors, these moves highlight two key dynamics:

1. Capital Efficiency: Hexagon’s €2.7 billion from the D&E sale and undisclosed SIG proceeds provide flexibility to fund R&D in autonomous systems or return capital to shareholders.
2. Strategic Clarity: By separating ALI into NewCo, Hexagon reduces operational drag and enhances transparency, potentially improving valuation multiples for both entities.

Conclusion

Hexagon’s strategic reallocation of capital—from divesting mature CAE assets to spinning off high-growth SaaS businesses—positions it to thrive in a tech-driven industrial landscape. While the company exits competitive markets to consolidators like Cadence, it gains agility to innovate in measurement and autonomy. For the engineering simulation sector, this signals a shift toward specialization and AI integration, with Hexagon and its spin-off, NewCo, poised to lead in their respective domains.

Source:
[1] Hexagon agrees sale of Design & Engineering business to Cadence for 2.7bn EUR [https://hexagon.com/company/newsroom/press-releases/2025/hexagon-agrees-sale-of-design--engineering-business-to-cadence-for-27bn-eur]
[2] Cadence to Acquire Hexagon's Design & Engineering Business [https://www.gurufocus.com/news/3095067/cadence-to-acquire-hexagons-design-engineering-business-accelerating-expansion-in-physical-ai-and-system-design-and-analysis]
[3] Hexagon agrees sale of non-core business areas [https://hexagon.com/company/newsroom/press-releases/2025/hexagon-agrees-sale-of-non-core-business-areas]
[4] Hexagon prepares for the spin-off of its Asset Lifecycle Intelligence division [https://hexagon.com/company/newsroom/press-releases/2025/hexagon-prepares-for-the-spin-off-of-its-asset-lifecycle-intelligence-division-and-related-businesses]
[5] Geographic Information System Market Size and Share [https://www.mordorintelligence.com/industry-reports/geographic-information-system-market]
[6] Hexagon AB (publ) Earnings Call Transcript Q3 2023 [https://www.roic.ai/quote/HXGBY/transcripts/2023/3]