Siemens Buys Altair: A $10 Billion  Siemens is making a significant investment in the U.S. industrial software company Altair, valued at around $10 billion, which equates to nearly 70 times this year’s expected EBITDA. This high price tag is indicative of the scarcity of assets in a consolidating market, as demonstrated by recent acquisitions like Synopsis’s $35 billion purchase of Ansys and Cadence’s acquisition of Beta for $1.24 billion. Prior to the deal’s leak, Altair was trading at 58 times EBITDA.

Despite concerns about the valuation, Altair’s growth potential in industrial software is promising. As manufacturing becomes increasingly complex, companies are looking to create ‘digital twins’—virtual models of products that can be tested under various conditions—making this software vital.

Siemens sees potential for cross-selling revenue synergies by acquiring Altair, as it lacks specific capabilities in mechanical and electromagnetic simulation that Altair possesses. The company hopes to generate $260 million in additional EBITDA through cost cuts and revenue synergies, which is still significantly below the expected costs of the acquisition.

However, this acquisition could benefit Siemens investors, especially since the company trades at about a 30% discount to its peers when excluding its substantial stake in Siemens Healthineers, which was spun off in 2018. By focusing on core growth areas like software, and potentially financing acquisitions through divestitures—such as the recent sale of its large motors division, Innomotics, for $3.5 billion—Siemens may improve its corporate structure and enhance investor confidence.

Siemens Buys Altair: A $10 Billion Siemens has announced a $10.6 billion acquisition of U.S. engineering software company Altair Engineering, a move that analysts believe will enhance Siemens’ position in the rapidly expanding industrial software market. However, there are concerns regarding the premium Siemens paid, with the offer of $113 per share representing an 18.7% increase over Altair’s share price before news of the sale surfaced on October 21.

This acquisition marks Siemens’ largest since the $16.4 billion purchase of Varian Medical Systems by Siemens Healthineers in 2020. Analysts at Alpha Wertpapierhandel noted that while the deal comes at a steep price, it would bolster Siemens’ struggling digital industries division, particularly by integrating Altair’s AI-powered design and simulation capabilities. Jefferies analyst Simon Toennessen highlighted that the acquisition enhances Siemens’ expertise in artificial intelligence and high-performance computing.

Additionally, this move positions Siemens as a more formidable competitor against chip-design companies like Synopsys and Cadence Design Systems, especially after Synopsys’ agreement to acquire design software firm Ansys earlier this year.

Following the announcement, Siemens shares fell by 0.8% at 08:27 GMT, which some traders attributed to the perceived high cost of the acquisition.

Siemens Buys Altair: A $10 Billion Altair’s simulation software, which helps predict real-world product performance, aligns with Siemens’ strategy of merging its hardware and software to create a seamless connection between the physical and digital realms. The German company is seeking to diversify its client base beyond traditional industrial customers by enhancing its digital offerings, aimed at improving the efficiency of production lines, trains, and buildings.

Siemens anticipates the deal will contribute positively to earnings per share within approximately two years after closing, which is expected in the latter half of 2025. The acquisition is projected to boost Siemens’ digital business revenue by around 8%, adding about €600 million ($651.4 million) to fiscal 2023 revenue. In the mid-term, the deal is expected to generate an annual revenue impact of about $500 million, potentially exceeding $1 billion annually in the long run.

The industrial software market, currently valued at around $21.5 billion, is projected to grow by 16.7% annually, making it a lucrative area for investment. Meanwhile, Altair reported a 13% increase in third-quarter revenue, reaching $151.5 million, reflecting the growing attractiveness of engineering software firms as acquisition targets amid the AI boom.\

Siemens Buys Altair: A $10 Billion Siemens has signed an agreement to acquire Altair Engineering Inc., a global leader in computational science and AI software, for approximately $10 billion, translating to $113 per share for Altair shareholders. This offer represents a 19% premium over Altair’s closing price before reports of the acquisition emerged on October 21, 2024. The deal strengthens Siemens’ position as a prominent technology company and enhances its leadership in the industrial software sector.

According to Roland Busch, President and CEO of Siemens AG, this acquisition is a crucial step that aligns with Siemens’ mission to drive digital and sustainability transformations for its customers by integrating the physical and digital worlds. The combination of Altair’s simulation and AI capabilities with Siemens’ Xcelerator will result in the world’s most comprehensive AI-powered design and simulation portfolio. Busch emphasized that this move builds on Siemens’ 15-year effort to lead in industrial software, democratizing data and AI benefits across industries.

Siemens’ CFO, Ralf P. Thomas, noted that the acquisition is strategically sound and supports Siemens’ focus on balancing investment with shareholder returns while maintaining a strong balance sheet. The deal is projected to be accretive to earnings per share (EPS) two years after closing.

James Scapa, founder and CEO of Altair, highlighted the significant growth of Altair from a Detroit startup to a leading technology firm over nearly 40 years, stating that the merger will effectively combine Altair’s extensive simulation portfolio with Siemens’ strong expertise in mechanical and electronic design.

The integration of Altair’s simulation strengths, particularly in mechanical and electromagnetic domains, will enhance Siemens’ Digital Twin capabilities, providing a full suite of physics-based simulation tools as part of Siemens Xcelerator. Altair’s AI-driven simulation capabilities will make it easier for users, including engineers and non-specialists, to leverage simulation insights, speeding up design processes and time-to-market.

Siemens Buys Altair: A $10 Billion This acquisition is expected to increase Siemens’ digital business revenue by approximately 8%, contributing around €600 million to the company’s digital revenue of €7.3 billion reported in fiscal 2023. Siemens anticipates substantial revenue synergies from cross-selling opportunities and granting Altair access to its global customer base, with an expected revenue impact of over $500 million annually in the mid-term, growing to more than $1 billion in the long term. Additionally, Siemens aims to achieve short-term cost synergies, estimating an EBITDA impact of over $150 million per year by the second year after closing.

The acquisition will be fully financed with cash from Siemens’ existing resources, supported by a strong balance sheet. Siemens has already completed the divestment of Innomotics, providing additional capital for the transaction, and it also plans to leverage proceeds from potential share sales in listed entities. The deal is subject to standard conditions and is expected to close in the second half of 2025.

Founded in 1985 and headquartered in Troy, Michigan, Altair Engineering specializes in software and cloud solutions for simulation and analysis, data science, and high-performance computing, serving various industries. Siemens AG, headquartered in Berlin and Munich, focuses on industry, infrastructure, transport, and healthcare, creating technology with a purpose that adds real value for its customers. In fiscal 2023, Siemens reported revenues of €77.8 billion and a net income of €8.5 billion, employing around 320,000 people worldwide.

This communication may contain forward-looking statements related to Siemens’ future business and financial performance. Investors are encouraged to read relevant filings with the SEC, including proxy statements and annual reports, for important information regarding the proposed transaction.