ANN ARBOR, Michigan, March 15th , 2004 — EDS today announced that it has reached an agreement to sell 100% of its UGS PLM (Product Lifecycle Management) Solutions business unit for $2.05B. The acquiring entity is comprised of a three-company team: Bain Capital, Silver Lake Partners, and Warburg Pincus Private Equity Group. The sale is expected to be completed within the next 90 days.
This sale completes a process initiated by EDS last October, and that has been followed closely by the industry since that time. According to EDS, sale of the UGS PLM Solutions business unit, one of the premier providers of PLM solutions to industry, is a divestiture of a non-core, non-strategic unit while enabling UGS PLM Solutions to further enhance its future growth.
Commenting on this, Ken Amann, Director of Research at CIMdata said, “ Establishing UGS PLM Solutions as an independent company is a very positive move for EDS, the new company, and for the PLM industry. EDS is fundamentally a service company while UGS PLM Solutions is a software company with a service component.” Mr. Amann added, “As a separate entity UGS PLM Solutions will be able to act independently and as a software product/solution-focused organization. The new company will have visibility they lacked while a part of EDS and will stand on its own in the PLM industry; both in financial performance and other aspects of its operation.”
Mr. Amann continued, “This move will free UGS PLM Solutions from the perception that it had become an “EDS only” services provider and distribution channel.” Prior to their acquisition by EDS, SDRC had one of the PLM industry’s largest and most effective partner sales and services programs. Post acquisition, many former and potential new partners were concerned about possible competition and channel conflict with other EDS business units. Establishing UGS PLM Solutions as an independent company will enable it to re-energize its partner channels, improve its competitive market positioning and continue to expand its global market presence. Mr. Amann said, “We expect UGS PLM Solutions to quickly and aggressively expand and strengthen its partner program and distribution channels - broadening its reach geographically and into new market segments. Further, we believe that leading systems integrators such as Accenture, Cap Gemini Ernst and Young, and others around the world will be more aggressive in using the Teamcenter, NX and E-Factory product suites to develop and deliver PLM solutions to their clients.”
CIMdata expects that EDS and UGS PLM Solutions will continue to maintain a significant relationship. This situation will be somewhat similar to that of IBM and Dassault Systèmes, although EDS will not provide the strong marketing and software sales role that IBM provides for Dassault. EDS has generated substantial services and outsourcing revenues based on the UGS PLM Solutions business, and CIMdata expects EDS to continue to commit significant resources to further develop its PLM-related business while taking advantage of the UGS PLM Solutions product suite. CIMdata also expects EDS to continue to be a major implementer of UGS PLM Solutions’ product suite, and to continue as one of the leading providers of PLM-related services in the world. Mr. Amann concluded that, “We at CIMdata believe this acquisition is a positive move in the PLM industry, and one that should have positive implications for UGS PLM Solutions and its customers.”
This action generates cash for EDS at a time when that is clearly a priority. Further, while UGS PLM Solutions will retain strong ties with EDS and be able to leverage that relationship to deliver comprehensive solutions to its clients, this announcement removes uncertainties that have been associated with EDS’ UGS PLM Solutions Business Unit since EDS’ public financial issues became highly visible over a year ago.
The investment team has a track record of acquiring profitable companies in growth industries. CIMdata believes that they will maintain ownership of UGS PLM Solutions and provide additional investment funding that will enable it to more aggressively expand its PLM solutions offerings both through internal development and external acquisition. Investing in an industry with a strong growth opportunity was one of the major reasons for the investment group’s commitment. Bain Capital’s press release quoted CIMdata’s PLM market growth forecasts as one of the reasons for investing in UGS PLM Solutions.
Each of the investment group partners indicated that investing in UGS PLM Solutions was a commitment to leadership in a growing market: "We are excited to partner with Silver Lake and Warburg Pincus to acquire the technology and market leader in the PLM business, and to support a talented team as they further build what is already a successful global enterprise," said Andrew Balson, a Managing Director at Bain Capital. "UGS PLM Solutions has earned its leadership position by developing mission critical software and integrated services for leading companies in design intensive industries. We are committed to investing to grow the business by continually increasing the value that the company's technologies deliver to customers."
David Roux, founding principal of Silver Lake Partners said, “UGS PLM Solutions is the undisputed market share and technology leader in the rapidly expanding PLM industry. We like investing in proven winners and look forward to working with CEO Tony Affuso to grow this outstanding software franchise."
Joseph P. Landy, co-president of Warburg Pincus said, "We look for these types of opportunities -- to invest in market leading businesses that create sustainable value. And, from its established position of global strength in the core design and engineering software market, UGS PLM Solutions is at the forefront of innovative software vendors that are creating real business value."
The team’s $2 billion plus investment reflects UGS PLM Solution’s position as one of the leading PLM solution providers and that it has consistently increased its profitability in a highly competitive industry, even during the past two years of economic difficulty. Given UGS PLM Solutions’ track record we do not anticipate any changes to UGS PLM Solutions’ solid management team.
