Yesterday, while we were busy trying to digest all Dassault Systemes’ earnings and PTC’s Creo announcement, Hexagon quietly closed its acquisition of Intergraph.

Back in July, Hexagon announced that it wanted to acquire the US-based seller of plant design and geospatial solution, but that the deal was subject to a number of conditions, not the least of which was how to provide continued support to Intergraph US Defense and intelligence customers and how to fund the acquisition.  Hexagon has been knocking these down one by one, announcing a separate company to handle transactions with US intelligence-related business and securing financing.  Earlier this week the company reported that it has obtained all of the necessary approvals and now — TADAA — the deal is done.

Hexagon paid a cash purchase price of $2.125 billion to the prior owners, an investor group led by Hellman & Friedman and Texas Pacific Group (now TPG). The investors bought the company in 2006, in a transaction that was valued at approximately $1.3 billion.  So in 4 years, the investor group earned around $800 million dollars — a 13% annual rate of return.  Not bad.

Intergraph’s CEO, Halsey Wise and his executive team have stepped down but Process Power and Marine (PPM) head Gerhard Sallinger and Security Government and Infrastructure (SG&I) lead John Graham remain in charge of their respective divisions.  The turmoil surrounding this transition has lasted a year but does not appear to have affected Intergraph’s ability to generate revenue:  Hexagon reiterated that Intergraph would likely report revenue of $830 million to $840 million for calendar 2010 — a nice increase of 8% from 2009 and blowing past 2008 revenue of $808 million. [Since the deal closed on October 28, no results from Intergraph were included in the results Hexagon announced on the October 28 by Hexagon.]

So what happens now?

Intergraph’s divisions keep doing what they’re good at.  Hexagon has said that it plans no changes at this point to either division’s core strategy, products or brands but that it anticipates tighter integration between Intergraph products and other offerings in Hexagon’s portfolio. Tighter coupling, for example, between PP&M’s SmartPlant and Leica’s ScanStation point cloud scanners is good; standardizing on ScanStation to the exclusion of other vendors’ systems could be bad, given that there are other solutions in the marketplace.  Does this integration enhance Intergraph’s position within the plant design vendor space? Perhaps — but the stability that the new owners can create will likely do more to spur adoption of the SmartPlant and SmartShip product sets.

On the geospatial side, it’s easier to understand how the combination is greater than the sum of its parts.  Hexagon’s other divisions make products (cameras, scanners, measurement devices and so on) that tie very well to Intergraph’s GIS solutions: Hexagon products capture data that can be analyzed and displayed using GeoMedia and G/Technology.  In many cases, customers are already doing this;  workflows could be dramatically improved by tighter integration.  In the GIS world, this combination creates a formidable competitor to ESRI, the largest GIS software provider.

From a market perspective, it will be interesting to see how Hexagon, a public company with a greater responsibility for transparency and openness, changes Intergraph’s marketing and sales approach.  I’ve found Intergraph willing to share information when asked, but not very proactive at reaching out — something it must do to reassure current customers and to explain future directions.

Customer reaction was mixed wen the deal was announced:  happy that a new, strategic owner was taking over but worried about staff and strategic changes.  Hexagon’s comments that it is buying Intergraph because of its current market presence and future plans and intends to make no changes did settle early concerns, but it’s up to Hexagon to prove its intentions.