Big news! Siemens announced today that it is acquiring LMS International and pairing it with its PLM division. We’ve got facts, a bit of history and, lastly, my impressions. (In case you can’t wait: It’s a good thing — for LMS, Siemens PLM and their customers.)

Siemens says it will pay roughly €680 million for LMS, or $870 million. Given that LMS had revenue of €140 million for the year to date and assuming a linear progression for the year as a whole, that’s a revenue multiple of about 3.6. Compared to recent acquisitions, that’s a pretty steep multiple and shows how strategic Siemens believes LMS to be. Too, this may be the most expensive CAE acquisition to date, narrowly beating out the $840 million ANSYS paid for Ansoft in 2008.

The deal is expected to close in early January 2013. LMS will become the “Test and Measurement” business unit within PLM, with profit and loss responsibilities at the same level as NX, Teamcenter and Tecnomatix.

LMS International was formed in 1980, as a spinout from the University of Leuven. LMS is probably best known for its noise, vibration and harshness offerings, but today markets three simulation platforms: LMS Imagine.Lab, (aka AMESim) for 2D mechatronics system development; LMS Virtual.Lab, for 3D FEA and multibody mechanical systems modeling and LMS Samtech, a general-purpose FEA solution based on the SAMCEF solver suite along with ancillary solutions.

In addition to software, LMS sells hardware for physical validation, something Siemens PLM CEO Chuck Grindstaff says is vital to its mission of integrating the physical and virtual worlds. With this acquisition, Siemens PLM can offer a much more complete closed-loop design-simulate-build-test-validate solution.

LMS’ main customers tended to be in the automobile and aerospace verticals, although the company has lately been branching out into other industries like wind power. Mr. Grindstaff noted that LMS and Siemens PLM already share a number of customers (BMW and Daimler came up a couple of times), but that Siemens’ greater reach can bring LMS’ products to a much wider market. According to Siemens, LMS has 5,000 customers with over 100,000 “R&D engineers”.

A couple of interesting things about this deal:

• LMS was one of first companies to sign on to Dassault Systèmes’ CAA developer network over a decade ago and, according to Mr. Grindstaff, now gets roughly 10-15% of revenue from CATIA-related offerings. Mr. Grindstaff was clear: this is an important part of LMS’ business and will be maintained (as much as Dassault Systèmes allows, of course).
• This is quite likely the second largest acquisition Siemens has made for its PLM business (the largest being UGS/SDRC). Siemens doesn’t often talk about how much it spends on these deals, but said today that it has invested €4 billion (yes, FOUR BILLION) since 2007 on acquisitions in its Industrial IT and Software sector. Clearly, Siemens in serious about this business and has moved to fill out its offering.
• Siemens PLM acquires a hardware business with this deal. LMS has never said how much of its revenue was software versus test hardware and data acquisitions systems, but I’ve always thought the majority of revenue came from non-software offerings. How Siemens PLM will integrate this (and its lower margins) into its sales strategy is unclear.
• The greater Siemens family already has offerings in the test and measurement space — and many of Siemens PLM’s customers use data acquisition systems from LMS’ competitors. It’ll be interesting to see if there’s a commensurate consolidation in the data acquisition market.
• LMS had taken a majority stake in SAMTECH to work more closely with aerospace companies. It’s unclear to me what happens with this after the deal closes.

My take: This combination makes sense on a number of levels. First, LMS struggled during the economic downturn as its relatively smaller reach and heavy dependence on the automotive market limited growth. Combining with Siemens gives LMS’ customers confidence in continued support, product enhancement and longevity.

In addition to great products, Siemens PLM gets a word-class engineering team, capable of solving some of the automotive and aerospace industries’ gnarliest problems — a team that I hope Siemens PLM grows so that it also supports NX Nastran, Femap, Vistagy and its other CAE solutions to provide a full-service CAE backbench.

Customers win, too. Some of this is already in place (and a roadmap to fill in the gaps won’t be known until after the deal closes), but a combined Siemens PLM + LMS will enable a tight connection between LMS Virtual.Lab and NX Nastran for analysis and visualization along with data management, control and collaboration in Teamcenter Simulation Data Management. In a perfect world, Siemens would extend Teamcenter to encompass the massive amounts of data generated by LMS Test.Lab, too, to generate a complete solution that takes a customer from requirements to validation. We’ll find out in January where that fits in the roadmap.

[Note: I’ve got a series of questions in to Siemens management. I’ll write a quick update post if warranted. — Ed.]