On October 30th 2024, the German multi-national technology firm Siemens announced its definitive agreement with the US-based engineering software provider Altair for $10.6bn. Siemens valued Altair at $113 per share, reflecting a 19% premium to the its closing price the day prior to the deal announcement, likely based upon Siemens' forecast of an 8% rise in its digital business revenue from this deal. These synergies are expected to be generated through the integration of Altair's software with Siemens' existing offerings to enhance the impressive suite of industrial software solutions.
Siemens boasted over $78bn in annual revenue in FY 2023, with a $7bn slice of that pie stemming from its digital business. Evidently, Siemens has established itself as a global powerhouse in technology over its outstanding nearly 200-year lifespan; founded in 1847.
Altair, founded during the Regan boom in the 1980s, has grown to become a notable competitor of Siemens' in the technology industry. Now a global leader in providing software solutions in Simulation, Analysis, High Performance Computing (HPC), data science, and AI. It flaunts an annual revenue exceeding $600m, although ran a net loss of $8.9m in FY 2023 which was up from a net loss of $43.4 in FY 2022.
At a $113 per share valuation, Siemens was willing to pay a 19% premium for Altair, which is notably low for the technology sector. Typically, premiums tend to appear above 25-35%. For instance, in the high profile Synopsys-Ansys mega-deal at the start of 2024, Synopsys paid a 29% premium for Ansys, a similar, though much larger, engineering software firm.
Despite the lower-end premium, the $10.6bn valuation of Altair aligns with wider industry trends in technology. At this price, Altair is valued with a 25x EV/EBITDA ratio, which matches the pricey industry averages. These prices are driven by the surging demand for AI-powered technology, with Altair serving many clients in clients in the Fortune 500. Following this deal, Siemens now claim to hold the "worlds most complete AI-powered design and simulation portfolio," and will look to cement a leading position against key competitors such as General Electric, Schneider Electric, and Hitachi.
Citi and J.P.Morgan financially advised Altair on the sell-side of this deal, whilst Siemens have not publically disclosed financial or legal counsel for the buy-side of this acquisition.
This deal is expected to close in the second half of 2025, though this is subject to regulatory approval. As with any deal of this size, the market impact and change to competiton will be heavily scrutinised by a number of regulatory boards, such as the FTC and the EC. This acquisition should pass through; at worst Siemens may have to divest other areas of the business to ensure fair market competition.
If approved, this fairly-priced $10.6bn acquisition strengthens Siemens’ position in the industrial software sector, enhancing its digitalisation products. But, the process may involve extended reviews to address regulatory concerns and is a long way from finalising.
Sources: Reuters, Yahoo Finance, Press Releases
Written by: Alexander Philp
Comments