Software AG takes €344m from US private equity group, plans US acquisition spree
Software AG has entered into a strategic partnership with global tech investment leader Silver Lake, supported by a Silver Lake investment of €344 million. It marks the first time a US technology investment firm has completed a private investment in public equity (PIPE) deal in Germany, the firm said.
The Darmstadt-based outfit, named a leader in Gartner’s latest ‘magic quadrant’ for industrial IoT review, and also for enterprise architecture tools (for the 14th year running), said the investment is a “vote of confidence” for its so-called Helix transformation, unveiled a couple of years back to change its business model, to be a subscription-based services company, and take it on a “pathway to sustainable, profitable growth”
Software AG said it can access a bigger share of total addressable market (TAM) worth €61 billion, which is forecast to grow at a compound rate of 16 percent through 2026. It said it will “double down” on its existing strategy, and drive “value-creating” acquisitions in new market segments, adding “complementary technology and go-to-market capabilities, and expanding cross-sell opportunities”. It is focused on expansion in North America, in particular.
Karl-Heinz Streibich and Ralf Dieter, chairman of the board and chairman of the audit committee atSoftware AG have stepped down. Christian Lucas, managing director at Silver Lake and co-head of the firm’s activities in Europe, and Jim Whitehurst, former chief executive of Red Hat, will join the supervisory board in the new year. Christian Lucas is expected to be elected as chairman of the supervisory board.
Sanjay Brahmawar, chief executive at Software AG, said: “Silver Lake has a reputation of investing in businesses with huge growth potential… With Silver Lake’s expertise, and the addition of some of the world’s leading software experts, we’re excited to unlock the next phase of our growth strategy…, accelerate growth through our cloud native product set and further strengthen our position in North America.”
Lucas said: “We are thrilled to be investing in one of Germany’s leading companies. Software AG is a great business, and we have been admiring the Helix transformation over the last three years, as [the] team have laid the foundation for growth through transforming the product portfolio, reigniting the culture and shifting the business to subscription and SaaS. This success from the first phase of Helix leaves us extremely excited.”
Silver Lake is purchasing €344 million aggregate principal amount of two percent convertible subordinated unsecured notes due in early 2027 with an initial conversion price of €46.54 per share. The conversion price represents a conversion premium of 20 percent over the closing price of the company’s common stock sale price of €38.78 per share.
At last count, at the end of the third quarter, the company’s revenues were six percent higher year-on-year, with its digital businesses posting back-to-back quarters of double-digit product revenue growth since 2013.