Hessen, Germany-based Software AG, a company that provides business process management, data management, and consulting services, has entered into a strategic partnership with US-based Silver Lake, a global technology investment firm.
Under the partnership, Silver Lake will invest €344M in Software AG. This is the first Private Investment in Public Equity (PIPE) by a US technology investor in a German company.
Sanjay Brahmawar, Software AG’s CEO, says, “The combination of Silver Lake’s expertise and network and our Helix transformation will help us further capitalise on our rapidly expanding market opportunity. Silver Lake’s investment represents a strong endorsement of our strategy, our team and our future growth potential.”
Transaction overview
Silver Lake says that it is purchasing €344M aggregate principal amount of 2 per cent convertible subordinated unsecured notes due in early 2027 with an initial conversion price of €46.54 per share.
The conversion price represents a conversion premium of 20 per cent over the closing price of the company’s common stock sale price of €38.78 per share on the Frankfurt Stock Exchange as of December 10, 2021.
Capital utilisation
The proceeds from this round will help Software AG to accelerate growth, supported by its cloud-native product set, further strengthen and extend its position in North America, and execute a strategic programme of value-creating M&A.
The funds will also be used by the company to enable the next phase of Helix.
Christian Lucas, Silver Lake MD and co-head of the firm’s activities in Europe, says, “We have been admiring the Helix transformation over the last three years, as Sanjay and his team have laid the foundation for growth through transforming the product portfolio, reigniting the culture, and shifting the business to subscription and SaaS. This success from the first phase of Helix leaves us extremely excited to partner with Software AG as it accelerates its growth journey.”
By leveraging Silver Lake’s deep industry knowledge, relationships and experience, Software AG believes it can access more of its €61B Total Addressable Market (TAM), which is forecast to grow at a 16 per cent CAGR between 2020 and 2026.
What does Software AG offer?
Software AG provides business process management, data management, and consulting services globally. Since 1969, it has helped more than 10,000 organisations to use software to connect people, departments, systems, and devices.
The company empowers connected enterprises using integration and APIs, IoT and analytics, and business and IT transformation. Currently, it has about 4,700 employees across more than 70 countries and annual revenue of over €800M with an aim to exceed €1B by 2023.
Changes in Software AG’s Board
Karl-Heinz Streibich, the Chairman of Software AG’s Supervisory Board, and Ralf Dieter, Chairman of the Audit Committee, have decided to step down from office from January 31, 2022.
Christian Lucas, MD at Silver Lake and co-head of the firm’s activities in Europe, and Jim Whitehurst, former CEO of Red Hat, will join the Supervisory Board as soon as possible thereafter.
Based on discussions between Silver Lake, Software AG and the current Supervisory Board members, it is expected that Christian Lucas will be elected as Chairman of the Supervisory Board.
Brahmawar says, “The addition of Christian and Jim will provide our Supervisory Board with valuable insight and expertise as we grow through new partnerships, investments and acquisitions. Christian, Jim, and Silver Lake have a history of working closely with management teams to create value by identifying and delivering on unique business opportunities in the software industry.”