Siemens snaps up CD-adapco for a cool $1 billion

Jan 25, 2016 | Hot Topics

The rumors are finally confirmed: Siemens PLM is acquiring CD-adapco for $970 million. For those keeping track, that’s about a 5x revenue multiple.

ADDED after this blog was first published at around 2PM ET on 25 January 2015 because people were asking for a bit more detail: CD-adapco makes computational fluid dynamics (CFD) software called STAR-CD and STAR-CCM+ and design optimization (MDO) software called HEEDS, among other brands, all designed to speed up product design and eliminate the need for physical prototyping. The company has been around a long time and is one of the few remaining large, privately-held CAE (the more encompassing term for simulations) companies in the world. It’s mostly complimentary to Siemens’ own CAE offering, though there is a bit of overlap.

Siemens’ press release says that CD-adapco had 900 employees and revenue of “close to $200 million with software-typical double digit margins” in the last fiscal year (ended September 30, I think). On average, the press release continued, “CD-adapco increased its revenue at constant currencies by more than 12 percent annually over the past three fiscal years”. In addition to that revenue, growth and those nice margins, what Siemens gets for this (admittedly) princely sum is solid CFD technology and the brains that developed it; a world-class services team with dedicated resources for each customer and a huge installed base that may or may not be using any of Siemens’ other technologies. There should be much scope for cross-pollination since CD-adapco will be “integrated into the PLM software business of Siemens’ Digital Factory (DF) Division.”

It’s not clear to me that this was supposed to be announced today. The rumors have been swirling for a while but this morning, a Reuters article quoted unnamed sources about the deal and Dassault Systemes CEO Bernard Charles sent out an email explaining why DS wasn’t acquiring it, so perhaps Siemens had to pull this together very quickly. [6PM ET: Nope. This was supposed to be announced today; the Reuters article just scooped it a few hours early. Unfortunate that the people affected had to read about it in the news rather than hearing about it from their management, as had been planned. — Ed.]

M. Charles said in his email that he didn’t think CD-adapco was worth $1 billion, and so would focus DS’ cash on building out their own CFD solution and go-to-market. His email is almost gleeful, indicating that DS enjoys driving up the price to make the competition pay more and create a “replacement dynamic”. [Note: M. Charles’ email explicitly encouraged employees to share it, so that’s why I’m writing about it. I’ve never seen anything like it; people who don’t win deals usually express some sort of gracious sentiment and move on. — Ed.]

More to come about why CD-adapco + Siemens PLM makes sense. To me, at least, if not to M. Charles.

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