PTC will acquire ServiceMax for $1.46B

This story ran in the Friday, Nov. 16, 2020 issue of my weekly newsletter. 

PTC has agreed to acquire ServiceMax in an all-cash deal valued at $1.46 billion. The deal combines PTC’s earlier efforts in digital manufacturing with software that can dispense service technicians to solve problems that get detected. So if a predictive maintenance algorithm detects a problem in a piece of manufacturing equipment, it can use ServiceMax’s software to send a technician to solve the issue and ensure the manufacturing job gets done.

Likewise, if the maker of a piece of equipment notes a bunch of service calls associated with a particular machine or multiple machines from the same batch, they can use ServiceMax data to ID the problem. Jim Heppleman, CEO of PTC, noted that this acquisition helps the company’s “closed-loop [product lifecycle management] strategy.”

There are very real reasons that this deal makes sense. PTC, which started out as CAD software for manufacturers, has spent the last decade making acquisitions to transform itself into a source of cloud-based tools for digital transformation. It has purchased ThingWorx, Kepware, and Vuforia as part of a cluster of acquisitions to digitize manufacturing and use augmented reality to share digital factory information with workers.

It has also bought a variety of other companies, including one in the service industry — Servigistics — back in 2012. As acquirers go, PTC’s corporate development team is “pretty dialed in,” according to Rick Bullotta, the co-founder of ThingWorx, which PTC bought back in 2013.

PTC has been a partner of ServiceMax’s since 2015. It has also danced with an acquisition of the company before. Last year, it contributed money to a special purpose acquisition company (SPAC) designed to acquire ServiceMax and take it public. That deal was scuttled in December 2021. Prior to that, in 2019, ServiceMax had been sold to SilverLake by GE Digital (remember GE Digital?) for an undisclosed sum. GE had acquired ServiceMax in 2016 for $915 million as part of a big bet on digital transformation.

So ServiceMax was shuffled around for a number of years before ending up with this deal. And to be sure, PTC isn’t a bad place for it to land. PTC has a clear vision for the IoT and has been executing on it for the past decade. It may have been a little early on technologies like ThingWorx and Vuforia, but it is still seeing considerable revenue growth as it moves deeper into digital manufacturing.

That said, PTC may struggle to integrate ServiceMax, which is built on the Salesforce.com platform. But PTC is very experienced with such integrations, given its history. And with ServiceMax, it also expands into new lines of business as ServiceMax customers run a large gamut outside of manufacturing. PTC has said that it expects the deal to be accretive in 2023.

PTC will fund the purchase in two stages, paying $808 million at closing in January 2023 and $650 million in October 2023. The transaction will be funded with cash on hand, borrowings under PTC’s existing credit facility, and a new $500 million committed term loan.