Eigen value analysis of an engine-sub-assembly using MSC Apex. Will CVC Capital be the new owners of this software? (Image courtesy of MSC Software.)
The recent trend in CAE acquisitions was one in which larger CAD or CAE firms would gobble up smaller ones. The path here is simple: add to the larger firm’s existing technology, broaden multiphysics and increase compatibilities and capabilities. This doesn’t seem to be the case here with the potential acquisition of MSC; however, it might be the end game achievement for CVC given MSC’s sales price.
How MSC’s Rumored Sale Compares to Others in the CAE Industry
The rumored purchase price of $800 million for MSC isn’t a bad return for the privatization costs at $360 million, but, it pales in comparison to the sale of Mentor Graphics’ to Siemens PLM Software for $4.5 billion.
Given the similar employee size of the companies this might look like a good comparison, and the rumor mill agrees. It has suggested that the differences in price have been caused by “declining revenues.” However, these sources failed to take internal industry strategy into consideration.
Mentor Graphics specializes in electronics design automation (EDA) and computational fluid dynamics (CFD) simulations; whereas MSC focuses mostly on finite element analysis (FEA)-based physics. FEA is much more common in the industry.
With the trend of CAE companies expanding their portfolios through acquisition, Mentor Graphics is very sought after with its EDA and CFD design spin.
In fact, given that Siemens recently purchased a CFD technology with CD-adapco, the sales price of Mentor Graphics by Siemens PLM may have been more strategic to ensure rival Dassault Systèmes didn’t get the EDA or CFD technology they craved. Or perhaps the price is the result of a bidding war between the two?
How will CVC Improve MSC for Users and Sales Price?
At the end of the day, CVC is an equity firm. They will want to sell MSC for much more than they bought it for. As a result, users shouldn’t be too afraid of what may happen to their software. The changes that will inevitably come if the sales goes through should improve abilities and capabilities of the product.
So, what could make a CAE company that is valued under a billion rise to multibillions? Well, the answer also lies in industry trends related to the Internet of Things (IoT) and the digital twin. PTC has shown its hunger for IoT, having now invested over $750 into the endeavor. It doesn’t take an ear to the floor to know that others are starting to follow.
So, to make MSC look more attractive, CVC might pursue an IoT and digital twin angle. To make this possible, it might look to its current portfolio and tap Wireless Logic. Wireless Logic is a European specialist in IoT, software management platforms and machine-to-machine (M2M) communication.
Perhaps by combining MSC’s software technology with that of Wireless Logic, as well as other CAE technology picked up along the way, CVC will be able to turn a hefty profit? If the sale goes through, I would then expect to see CVC sell the MSC amalgamation to another CAE leader like Siemens PLM, Dassault Systèmes or ANSYS to beef up one of those firm’s already growing IoT and digital twin portfolios.
MSC was contacted for comment on the rumored acquisition but was unable to reply.
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