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Is PTC hanging out the “For Sale” sign?

The Financial Times of London reported on Saturday that PTC has approached Goldman
Sachs about selling itself for something on the order of $2 billion. FT cites "people with
knowledge of the process" but was unable to get PTC to comment. The article says that
PTC is interested in either a private equity deal or an outright purchase by a competitor
would be considered. [Note: PTC was contacted for comment but had not responded by the
time this was posted. If they do comment, we will post an update.]

First, is the price reasonable? The most recent acquisitions in the PLM universe were
Moldflow by Autodesk and Ansoft by ANSYS. These were both strategic acquisitions
involving smaller dollar amounts, so the deals aren’t exactly comparable to putting PTC up
for sale, but they do provide an upper boundary. Moldflow was acquired for $297 million or
$22/share, a premium of 12% over the closing price of $19.61 on the day the deal was
announced. Moldflow had revenue of about $55 million, so this purchase price represented a
5.4 multiple of revenue. Ansoft was acquired for $832 million or a combined $32/share in
cash and stock. At the time the deal was announced, Ansoft shares were trading at $23.42,
so the price was a 37% premium. Revenue for the year was $103 million, for a revenue
multiple of about 8.

Using these ranges would lead to a PTC price somewhere around $2.5 billion to $2.9 billion,
given PTC’s opening price of $19.62/share today, and between $4.7 billion and … well, a
ridiculous number since the Ansoft deal was at such a premium to revenue. But combined
with the fact that PTC’s market cap right now is $2.4 billion, the FT numberof $2 billion would
seem a bargain price.

But PTC’s shares have had a recent run-up. Not that long ago, the stock was trading at $14
and $15 per share, so with a market cap of about $1.7 billion. This would be a more
reasonable view for buyers, but would the sellers agree? No.

Next, who wants PTC? There has been industry buzz for years that private equity buyers
were interested in PTC because they could separate the cash cow MCAD division from the
(then) less-successful Windchill products, sell off Windchill and ride the continuing MCAD
revenue stream into the sunset. But, rumor had it, PTC’s board refused all such offers. Who
knows if such rumors are true? It is, however very clear that equity buyers continue to be
interested in large profits in a relatively short timeframe. If one of them were to buy PTC now,
it’s likely that the prior strategy of separating the product sets would hold.

Which PTC competitor might want it? Hard to say. Autodesk has a pile of cash, but also has
its hands full trying to deal with all of its recent acquisitions — too, does it need yet another
mechanical CAD solution? It could happily integrate Windchill, but I doubt it would want
Pro/E. The other PLM vendors believe their products compete strongly on both MCAD and
data management and would have a hard time creating a sane product strategy that includes
their own as well as PTC’s products.

So that leaves dark horses. I definitely didn’t predict Siemens buying UGS, but that situation
was different. UGS had a great factory-floor-integrated-to-the-design-office vision, which made
it a slightly more natural fit than it first appeared. PTC has a weaker factory floor offering, but
still might be of interest to a Honeywell or other Siemens competitor. Then, too, PTC
competes in some markets its peers are less well-known in, such as apparel, that are driven
by international powerhouses not known to many PLM users. Wing Tai International Apparel
Group, currently partnering with DS, is a billion-dollar holding company that could be a
candidate acquirer. Or perhaps an auto company using Pro/E for powertrain could be

PTC is caught in that spot where its current high market cap makes it hard to find a buyer
with deep enough pockets; legacy revenue streams that are very attractive because of their
profitability and predictability; products in many markets that make it somewhat confusing to
target at an outside-PLM buyer … It’ll be interesting to watch what happens next.

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