Software AG Acquisition: Key Details, Impact, and What Comes Next

Silver Lake's acquisition of Software AG marks a significant shift in the tech industry. By securing over 85% of Software AG's share capital, Silver Lake aims to bolster the company's focus on cloud applications and data integration. This strategic move is expected to enhance Software AG's market position, particularly in North America, and drive its transition to a SaaS-first company.

What Is Software AG?

Founded in 1969, Software AG specializes in digital transformation solutions, offering products like Adabas & Natural for enterprise applications, ARIS for business process management, and CONNX for data virtualization and movement. The company stands out for its ability to modernize legacy systems while maintaining high performance and seamless integration with new technologies. Recognized in Gartner Magic Quadrant reports, Software AG is a comprehensive partner in a multi-cloud, ecosystem-driven world.

Who Acquired Software AG?

Silver Lake is a global leader in technology investing, known for partnering with exceptional management teams to build and grow companies. Their key service is managing a diverse portfolio across sectors such as Content & Entertainment, Enterprise Software, and Financial Technology. With $103 billion in assets under management and over $1 trillion in aggregate portfolio enterprise value, Silver Lake holds a significant market position, influencing the tech industry through high-profile acquisitions and strategic investments.

When Was Software AG Acquired?

Silver Lake completed its acquisition of Software AG on September 28, 2023. This acquisition aligns with the broader industry trend of strategic partnerships and consolidations aimed at strengthening market positions and accelerating strategic initiatives. The timing is significant as it allows Software AG to leverage Silver Lake's resources and expertise, enhancing its strategic execution amidst a rapidly growing market for business intelligence tools and digital transformation solutions.

Why Was Software AG Acquired?

• Market Expansion: Silver Lake's acquisition of Software AG allows it to tap into the rapidly growing business intelligence tools market, valued at around €61 billion and expanding at 16% per year through 2026. Additionally, the acquisition supports Software AG's focus on cloud applications and data integration, particularly enhancing its market presence in North America.
• Technology Integration: Software AG's robust technology portfolio, which includes capabilities in integrating applications, devices, data, and clouds, provides Silver Lake with a significant technological edge. This integration is expected to streamline processes and enhance the digital backbone of Silver Lake's existing and future investments.
• Competitive Advantage: The strategic partnership with Silver Lake is set to accelerate Software AG's transition to a SaaS-first company, bolstering its competitive stance in the digital transformation market. The financial backing and strategic support from Silver Lake enable Software AG to drive value-creating acquisitions and better compete against industry giants.

Acquisition Terms

• Acquisition Price: The acquisition price was €32.00 per share, valuing the company at approximately €2.6 billion.
• Payment Method: The transaction was conducted entirely in cash.
• Key Conditions or Agreements:
  • Fulfillment of all closing conditions, including the last outstanding merger control clearance obtained on September 15, 2023.
  • Silver Lake secured 85.1% of the share capital and voting rights of Software AG.
  • The Software AG Foundation signed a share purchase agreement to sell 25.1% of all shares to Silver Lake.
  • The retained 5% of shares by the Software AG Foundation are subject to a lock-up.
  • Silver Lake intends to delist Software AG’s shares.
  • The transaction is fully funded with equity and debt financing in place.

Impact on Software AG

The acquisition by Silver Lake has brought significant changes to Software AG's operations and management. With Silver Lake now holding 85.1% of the share capital and voting rights, the company is set to delist from the Frankfurt Stock Exchange. This move is part of a broader strategy to focus on cloud applications and data integration, transitioning to a SaaS-first business model. The management team, including new board members from Silver Lake, is working closely to execute a multi-year transformation plan, which includes potential sales of non-core products and a renewed focus on core offerings like Adabas & Natural and ARIS.

Regarding product offerings and services, the acquisition is expected to accelerate Software AG's strategic initiatives, particularly in the cloud and data integration markets. The sale of the webMethods and StreamSets business to IBM is a clear indication of this shift. While employee reactions have not been extensively documented, there are concerns about potential workforce reductions and the future of the company's headquarters in Darmstadt, Germany. Customer reactions remain largely speculative, but the strategic partnership with Silver Lake is anticipated to enhance service quality and innovation, benefiting clients in the long run.

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