Schneider Electric gets into construction, buys RIB

Feb 13, 2020 | Hot Topics

How interesting: Schneider Electric just announced that it is buying RIB Software, the German maker of cloud and desktop solutions for AEC/construction projects, for €1.4 billion (a 6.5x revenue multiple). Why? According to Schneider Electric Chairman and CEO, Jean-Pascal Tricoire, to “strengthen Schneider Electric’s position as a major player in the digital transformation of the engineering and construction industry,”

RIB is publicly traded, so Schneider Electric is offering €29/share in cash for outstanding shares, a premium of 40% to yesterday’s closing pice. Schneider Electric already owns 16% of the shares, bought from CEO Tom Wolf and other leaders as well as RIB’s treasury shares. RIB says that the takeover requires “a minimum acceptance threshold of 50% (plus one RIB share)” but it aiming for 100% of shares, so there are still quite a few to acquire.

Clearly RIB’s Board of Directors has approved the deal, saying it “welcomes the announced takeover offer and supports it within the framework of its legal obligations and subject to a review of the offer document to be published by [Schneider Electric]. Following publication of the offer document … the administrative board of RIB SE will publish a reasoned statement on the takeover offer pursuant…” German laws on takeovers.

That RIB wanted to be acquired isn’t a surprise — RIB CEO Thomas Wolf had said in 2019 that the company was open to outside investors. Today, he told reporters that “the deal will give us access to a lot of new clients’, … adding that he expected Schneider to support RIB’s expansion and to create jobs”.

That said, Schneider Electric as the acquirer is unanticipated (though I was asked about it just yesterday, so others clearly knew about the interest). Schneider Electric makes energy and automation solutions that are sold into residential, office and other buildings, including data centers and factories. All of which have to be constructed — and that could be more efficiently carried out using RIB’s tools.

What fascinates me about this is twofold: Schneider Electric didn’t do a good job of managing a software company when it owned Wonderware, SimSci and other brands — that’s why the combination with AVEVA, a dedicated software company, made so much sense on the industrial side. It sounds from the materials released so far that RIB will be a sister company to AVEVA rather than part of AVEVA. Will Schneider Electric invest in RIB to the extent needed? Has it learned from its short association with AVEVA how this business should be run? (M. Tricoire said that RIB is not part of AVEVA because of the focus on buildings, not part of AVEVA’s remit today. That part makes sense. And RIB’s current CEO and CFO will stay in place, at least for a bit.)

Second, AVEVA needs to boost its offering for construction. It otherwise covers the concept-design-operate aspects of plant and industrial projects; construction is/was the gaping hole. I’ve not spoken with a single RIB customer outside the building domain and am not sure that RIB can be reworked to suit the rigid requirements of that world. Can it have impact there as well? Will there be cross-over? How could that work?

A lot of investors and technology buyers underestimated. RIB It has over 100,000 customers and over 500,00 users around the globe (yes, most in Europe). Their long-time offering is desktop; newer is the cloud rework of most of the desktop; newest is its the product set that lives atop the Microsoft Azure stack. Users create proposals, manage construction projects and cost data — generally replacing Excel and paper processes. Their biggest issue was size: Autodesk is far bigger and has many more feet on the street, selling a view of digitized construction.

Schneider Electric’s M. Tricoire reinforced the point of the deal being to make buildings and data centers more efficient, and that RIB’s cloud-based offerings will be critical to bridge, digitally, the worlds of construction and operations. He also reaffirmed that he has no interest in taking on BIM design; that’s already covered by others, with whom the company will continue to partner. He wants to bring to RIB the international sales network and large-company credibility that Schneider Electric carries.

The investor presentation said that RIB is expected to be accretive to earnings in 2021, and to show double-digit organic revenue growth.

The timeline: filing with the German authorities by the end of February; in March and April, Schneider Electric will work to acquire the shares it needs for the takeover. The deal, assuming this all work and regulators approve, is expected to close by the end of Q2.

I’ll update once I see the filing and if I learn more about the questions I raised above.