M&A Alert—November 14, 2016
GE Digital acquires field service software provider ServiceMax for $915 million
Author: Eric Risley, John Ascher-Roberts
Transaction Size: $915mm
On November 14, 2016, General Electric (NYSE: GE) announced an agreement to acquire field service software provider ServiceMax for $915 million.
ServiceMax offers a cloud-based platform that helps field service reps and workers manage scheduling, invoicing, payments and equipment maintenance. Its platform leverages mobile devices, IoT signals, augmented reality data and machine learning to rapidly process data and relay important information to field service workers to make them aware of what needs fixing quickly. It has been named the top leader in Gartner’s Magic Quadrant for Field Service Management. ServiceMax has over 400 customers including major brands such as Coca-Cola, Tyco, Bombadier, Kodak and Canon.
Athani Krishna, Chief Strategy Officer, and Hari Subramanian, CTO, co-founded the Pleasanton-based company in 1999. The company raised $204M in funding from investors including Adams Street Partners (Michael Zappert), Cross Creek Advisors, CrossLink Capital (David Silverman), Emergence Capital Partners (Jason Green), GE Ventures, Kleiner Perkins Caufield & Byers (David Mount), Mayfield Fund (Rajeev Batra), MeriTech Capital Partners (Robert Ward), PremjiInvest, PTC, QuestMark Partners (Michael Ward), Salesforce Ventures, Sozo Ventures, Trinity Ventures (Noel Fenton), and Woodside Fund. The company has projected revenues of $60M in 2016 and approximately 469 employees today.
General Electric (NYSE: GE) is a multinational infrastructure and financial services company founded in 1892 and headquartered in Fairfield, Connecticut. It is consisted of ten business units: GE Power & Water, GE Oil & Gas, GE Renewable Energy, GE Energy Connections, GE Aviation, GE Healthcare, GE Transportation, GE Capital, GE Digital and GE Lighting. General Electric last closed at $30.51 a share with a market capitalization of $269 billion and has $123 billion in TTM revenue ending September 30, 2016.
GE Digital was formed in September of 2015 with the goal of being a leader in the Internet of Things market. Its main offering is its cloud-based platform Predix, which connects industrial equipment, analyzes data, and delivers real-time insights to aid performance. Upon its formation, its enthusiastic CEO, Bill Ruh, claimed it would be “a top 10 software company by 2020,” and they have set a revenue goal of $15 billion for that year. He was the champion of the ServiceMax deal. The business unit expects to generate approximately $7 billion in revenue this year.
GE is purchasing ServiceMax for $915 million, the terms of which have not been disclosed.
Transaction Value: $915M
TEV / 2016E Revenue 15.3x
TEV / Invested Capital 4.5x
Comparable transactions include Microsoft’s acquisition of FieldOne Systems in July of 2015 (undisclosed), Francisco Partners’ acquisition of ClickSoftware Technologies in April of 2015 for $428M (3.0x LTM revenue), and Oracle’s acquisition of TOA Technologies in August of 2014 for $550M (11.0x LTM revenue).
ServiceMax and GE seems to be an obvious match given both their history and their complementary product portfolios. In addition to GE Ventures participating in ServiceMax’s $82 million Series F in August of 2015, the most strategic piece of this acquisition is combining the Predix and ServiceMax’s platforms. GE plans to connect the data collected with Predix to the ServiceMax applications, which will help its customers’ field service employees anticipate service and maintenance needs proactively. With the technologies combined, GE Digital begins to separate itself in the IoT ecosystem as being able to provide the most efficiency to everyday business processes for its customers. This acquisition also provides GE Digital with a diverse vertical customer base and boosts its prominence as a field service software provider.
Architect Partners’ Observations
This acquisition seems to be the right step in hitting GE Digital’s lofty revenue and market share goals. Gartner estimates that the field service management software currently represents an $18 billion market worldwide. It estimates that by 2020, two out of three large field service organizations will equip field technicians with a mobile application.
However, this acquisition also pits GE more directly against some pretty venerable software companies. Microsoft, Salesforce, and Oracle all have either acquired or launched cloud services and applications for field service management.