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Software AG Snaps Up StreamSets for €524M

March 4, 2022

Software AG inked an agreement to acquire StreamSets, a leader in data integration for the modern data stack. With this acquisition, Software AG adds a sizeable and fast-growing SaaS and subscription business that is growing rapidly, with StreamSets’ revenue having grown at a four-year CAGR of more than 70% through 2021.

StreamSets’ enterprise-grade data integration platform enables customers to move data seamlessly and securely to and from any part of their digital backbone, which is built by Software AG’s Digital Business portfolio across hybrid and multi-cloud environments. This combination enables organizations to better unlock and capture value from data as it moves between on-premises applications, data streams, SaaS applications, legacy data stores and cloud data platforms like Amazon RedShift, Databricks and Snowflake. The combined hybrid iPaaS platform will deliver consolidated, conformed, continuous data to smart applications and the connected enterprise.

Sanjay Brahmawar, Software AG CEO, commented: “This acquisition is a major milestone for Software AG. We’re acquiring a fast-growing business in a cloud market growing 26%. Its technology and team will further differentiate our hybrid integration offering for customers and fully complement our strategy to deliver sustainable profitable growth. In Girish and the whole StreamSets team, we are welcoming outstanding colleagues with a track record of innovation and success. Their base in California also extends our presence in North America, and I am incredibly excited at the prospect of working with them to grow our business together.”

Girish Pancha, CEO of StreamSets, said: “We’re delighted to be joining the Software AG family and working with Sanjay and team on this next phase of our growth journey. Our products are made for each other, and we see tremendous opportunity in the convergence of application integration and data integration to deliver smart applications. I have been admiring Software AG’s transformation from afar, and together, I believe we will accelerate our growth trajectory by unlocking digital transformation for our customers.”

Strategic rationale

The acquisition is the first in Software AG’s M&A strategy which is designed to accelerate growth by opening up access to new parts of its €61 billion total addressable market. In this case, the deal will see Software AG enter the cloud data integration portion of the wider data integration market, a segment growing 26% annually in a market projected to reach $3.5 billion by 2025.

Where Software AG’s existing Digital Business portfolio connects a hybrid application landscape and integrates the transaction data within it, StreamSets’ technology collects, consolidates and moves data from across this landscape as well as a broader range of datasets including edge and process data. This requires smart data pipelines that understand the structure and meaning of the data passing through them and have the ability to transport the data to a set of hybrid destinations, such as modern cloud data warehouses, data lakes, messaging systems and event hubs. In this way, the StreamSets DataOps Platform delivers modern data pipeline technology to solve a crucial part of the hybrid integration challenge for enterprise customers.

Alongside this strong technology fit, StreamSets’ go-to-market approach is also highly complementary to Software AG’s. Both groups target the same enterprise customer segment and buying personas that reside in the same IT purchasing area. The companies also have highly complementary cultures, combining ‘agile start-up’ with ‘50 years bold’ global software company, but with a shared focus on innovation, customer success and growth.

Value creation

As well as benefitting from StreamSets’ rapid stand-alone growth, Software AG intends to create additional value from the acquisition in three main ways. First it plans to sell StreamSets’ highly complementary product into the Group’s own global hybrid integration customer base. Second, it will develop joint solutions, starting in the iPaaS space, and leverage the groups’ go-to-market alignment to take these product offerings to market as one. Over the medium term, Software AG expects the synergy revenues derived from these first two levers to exceed StreamSets’ stand-alone revenue in 2021.

Thirdly, in addition to the top-line synergies, Software AG will leverage its operational scale to help StreamSets grow much more efficiently, driving a material increase in profitability while maintaining a high growth rate going forward.

These factors, combined with the strategic fit and market backdrop, give the Group high confidence in StreamSets sustaining high double-digit revenue growth and becoming non-IFRS EBITA margin accretive in the medium-term.

Financial overview

Purchase price and funding

The purchase price consideration amounts to €524 million plus a customary retention package, agreed with and awarded to StreamSets senior management, and transaction fees. The transaction will be funded by cash and the group's existing credit facilities.

Further accelerating growth

Software AG continues to expect its organic business to meet its guidance for 2022 and its ambitions for 2023.

On top of this organic development, with the addition of StreamSets Software AG expects 2022 non-IFRS Group product revenue growth in the range of 12% to 16%. The Group also expects to see an impact on non-IFRS EBITA of between -€17 million and -€13 million in 2022.

Software AG also expects the acquisition to add to its organic growth in 2023. With the addition of StreamSets to the organic business, the Group expects total revenue to be comfortably ahead of its €1 billion goal.

These updated estimates exclude any impact from purchase price allocation. The Group will provide a further update upon closing.

The Group will continue to update on the progress of its underlying organic business performance.

The transaction is subject to regulatory approvals. The Group expects the transaction to close before the end of the first half of 2022.

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