Synopsys Sued by Private Equity Firm for Shopping $3 Billion Unit

A California private equity firm has sued Synopsys Inc. for allegedly breaching an exclusivity agreement when it shopped its $3 billion software integrity business widely earlier this year, in a rare instance of private deal negotiations spilling into the courts.

The private equity firm Sunstone Partners Management, LLC had signed a letter of intent to acquire part of the unit known as SIG, according to people familiar with the matter. But before the parties could close the deal and prior to the end of an agreed-upon exclusivity period, Synopsys publicly announced that it would put its entire SIG business up for sale, the people said.

Sunstone took the unusual step of filing a complaint over the dispute last month in Delaware Chancery Court and is seeking unspecified monetary damages and reimbursement for “millions of dollars in fees and expenses.”

“We have never done anything like this before and do not expect that we would ever do this again in the absence of extraordinary circumstances,” the firm said in a statement.

A Synopsys representative declined to comment.

The lawsuit is heavily redacted, but Sunstone alleges Synopsys failed to uphold the agreement when it announced in November that it was exploring strategic alternatives for SIG.

A month prior, Sunstone had signed a term sheet to acquire the security testing solutions portion of the unit, according to one of the people familiar with the matter. Sunstone alleges the chipmaker knew its November announcement was a breach of contract but “just did not care.”

“Soon after its earning calls on November 30, Synopsys wrote in an email to Sunstone that ‘we have much bigger fish to fry right now,’ namely the recently announced ‘decision regarding the whole SIG business,'” lawyers wrote in the complaint.

Bloomberg News previously reported that private equity firms including Advent International, Hellman & Friedman, and Thoma Bravo were considering bids for the unit.

“For its part, Sunstone was left holding the bag,” lawyers wrote in the complaint.

The case is Sunstone Partners Management, LLC v. Synopsys, Inc., 2024-0261, Delaware Chancery Court.

Top photo: Synopsys headquarters in Mountain View, California, U.S., on Wednesday, April, 13, 2022. Synopsys Inc., the biggest supplier of software used to design semiconductors, is under investigation by the U.S. Department of Commerce for possibly passing key technology to banned Chinese companies, according to people familiar with the matter. Photographer: David Paul Morris/Bloomberg.