Autodesk announced this week that it is offering £20.75 per share (for a total of about £172.5 million) to acquire Delcam, the publicly traded UK-based vendor of CAM-specific CAD, manufacturing and inspection solutions. Delcam reported 2012 revenue of £47.1 million, making the offer a 3.7 revenue multiple. Looking at the share price, the offer is a 21% premium to the prior day’s closing price, a 29% premium to the average closing price over the prior month and a 38% premium over the average for the prior six months. [We could keep working backwards, but you get the idea. The offer will allow shareholders to realize a profit.]
What’s in it for Autodesk? I am told by CAM users that Delcam’s solutions are among the best, often unique and are bolstered by the company’s manufacturing center that lets it both show its products in a real-world setting while allowing it to fine-tune its offerings. That added credibility, that most Delcam people are machinists first and software developers second, works really well with its target audience.
Last year Autodesk acquired HSMWorks and recently released versions integrated with Autodesk Inventor and Autodesk Fusion. No knock against HSM, but Delcam gives Autodesk another level of CAM, one that takes it out of the realm of a plugin and into the world of the CAM specialist. Yes, CAM is an art just like CAE — though much less appreciated. With this acquisition, Autodesk stands to be able to take a design from concept through realization, no matter how complex the shape or manufacturing process.
This is a cash offer for all the outstanding shares of Delcam. Typically, when that happens, an indication is given of how many shareholders have already agreed to take the offer. There is a rather cryptic “the cash offer for the outstanding common stock of Delcam has not yet commenced. This filing is for informational purposes only … ” but the company’s official rule 2.7 announcement says that its Directors and four major shareholders are on board, for a total of 45% of the outstanding shares voting in favor of the deal. I suppose the remaining 55% of shareholders could still vote against, but it seems unlikely.
The deal is expected to close early in Autodesk’s fiscal 2015, and so will have no impact on Autodesk’s fiscal 2014 (the current year). After that, Autodesk expects its Delcam subsidiary to be dilutive to non-GAAP earnings in fiscal 2015 and accretive to its non-GAAP earnings in fiscal 2016.
This is a good deal. For not too much money, Autodesk gets a great CAM brand and instant credibility in manufacturing. Delcam gets a much, much bigger distribution network and R&D base. Customers …. ah, customers. What truly makes Delcam special is its support capability (both channel and internal), and I hope that doesn’t get lost in the business deal. Combining a quintessential English company (they have a tea trolley!!) with a very West Coast/US vibe (tea?? not herbal??) is a risk. I think both parties are smart enough to know what made Delcam successful and can figure out how not to mess this up. Perhaps we can add strong coffee to the tea trolley?