Software AG takes over IDS Scheer

Fakelogo By Stefan Ried

Software AG acquires Business Process Modeling Expert IDS Scheer

The Deal

IDS-Scheer and Software AG announce late yesterday that the integration and legacy application platform vendor Software AG will take over the smaller business process expert IDS Scheer.

  • Dr. August-Wilhelm Scheer, the founder and chairman of the supervisory board of IDS Scheer AG and Dr. Alexander Pocsay, the co-founder and co-chairman of the supervisory board of IDS Scheer AG, have committed to accept the takeover offer for all shares in IDS Scheer AG held by them, i.e. a total of 15,332,622 shares (corresponding to approx. 47.68 % of the share capital and the votes). This indicates that the 67 year old charismatic Prof Scheer will not merge into Software AG and focus on his other activities such as heading the German Bitkom Association and numerous entrepreneurships with IT start-ups in Europe.
  • Software AG will pay a consideration – via its subsidiary SAG Beteiligungs GmbH – of EUR 15 per IDS Scheer share in cash. The total value of the takeover offer amounts to approx. EUR 482 million. The projected accumulated annual revenue of IDS Scheer and Software AG together would be around 1.1 billion Euro. With this Software AG’s CEO Karl-Heinz Streibich delivers on his promise to grow SAG’s revenue to the magic 1 billion Euro mark by 2010.
  • The start of the offer period is expected in the course of the current quarter. Software AG expects to close the transaction in the fourth quarter. No auction race, no regulator invention expected – it’s a done deal!

The Portfolio
IDS Scheer is a business process consulting firm with only 19% revenue contribution of its licensed software products. Although the public perception was dominated by the product positioning, this fact justified the relative low price based on its € 399 million total revenue in 2008. The ARIS product family is a leading business process modeling tool that mainly resonates to the European culture along the separation of business process analysis and planning from the implementation in a BPM system or another traditional IT system. While US customers tend to use more the modeling tools provided by the BPM runtime engines. IDS managed to gain significant market share with non-technical business analysts. The ARIS process modeling is complementary to Software AG’s current BPM offering and a natural fit for the European market. IDS Scheer’s second product branch called ARIS Business Performance Edition is a BPM runtime monitoring which observed the process performance of BPM runtime environments. Software AG has to figure out how to capitalize this asset as it overlaps with the Business Activity Monitoring (BAM) solution which was acquired via Software AG’s first major acquisition of WebMethods in 2007.

Is it a good fit?
First of all, it is an extension of Software AG’s professional services division. After the first serious attempt of recovering this branch of the company with the former Executive board member Holger Friedrich failed, this is the second and pretty promising trial. See more Forrester reports coming up from Stefan Ried around these aspects and the impact to the BPM market by Clay, Ken and Connie.

Impact on Partnerships and Distribution Channels
IDS Scheer established partnerships since a long time with SAP, and more recently with Oracle and  Microsoft. Until now, these partnerships has been a great sales channel for their products and created leads for consulting activities as IDS was not offering a BPM runtime engine. It was therefore complementary to these major business process platform vendors. However, the merger with Software loads all formerly clear complementary partnerships with a competitive burden. SAP missed again an acquisition which would have been a great fit to their portfolio as well. Software AG has now a major door into SAP’s install base heavily using ARIS in Europe and can sell the WebMethods integration stack aggressively against NetWeaver.

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