LONDON As part of a strategy for growth by acquisition, verification-tool developer TransEDA Ltd. plans an initial public offering of shares and expects to join the Alternative Investment Market (AIM) of the London Stock Exchange in the first week of October.
"We don't need money for operations, we're profitable and self-funding," said Ellis Smith, president and chief executive officer of the privately held company. "But we can use the money for getting together with other companies in our sector of EDA. We know of more than 50 companies in verification."
Smith confirmed that TransEDA (Eastleigh, England) would use money raised from the IPO and the ability to create additional shares as "currency for acquisition," to buy small EDA verification firms and build TransEDA's size. "We're aware of all the companies in our sector that have products, and there's a number we'd like to get together with," said Smith, who joined TransEDA in June 19 99 with a charter to expand the company. He would not say whether negotiations with potential targets had started but said he expected to move quickly once the IPO has been concluded.
Founded in 1992, TransEDA develops and sells software used to verify integrated circuit design descriptions. Its language-neutral (Verilog and VHDL) functional-verification tools perform code coverage, test suite optimization, state machine verification and rule checking. It has been backed by a U.K. venture capital group called MTI Partners.
As part of its intended offering, the company will be raising approximately $4 million for further product development and expansion. At the time of the IPO, it is expected to be capitalized at $30 million to $35 million.
TransEDA, though profitable, is still relatively small. Annual sales were about $6 million for the fiscal year that ended June 30. "Given our size, AIM is a good place to start," Smith said. AIM is considered a first step into the public market for fast-grow ing companies.
Since 1995, TransEDA has achieved a compound annual sales growth rate of 70 percent, from less than $750,000. The company claims that 18 of the 20 top electronics companies and 18 of the top 20 semiconductor companies use its products, including ARM, Compaq, Ericsson, Hewlett-Packard, IBM and Sony.
Smith said the decision to launch on the London-based AIM was unrelated to any anti-EDA sentiment among the financial community in the United States. "Since the dot-com phenomenon the definition of small cap on the Nasdaq has changed," he said. "We're probably a little small for Nasdaq."
Smith also downplayed fears of growing anti-EDA feeling. "It [the EDA industry] hasn't in the last year or two offered the same quick returns as the dot-com sector. But in the last few months neither has the dot-com sector. Long-term, EDA is a vital industry, vital to semiconductors and to telecommunications and to the Internet."