Software AG Partners with Silver Lake to Further Accelerate Growth

Software AG is forming a strategic partnership with Silver Lake, a leader in technology investing, anchored by a Silver Lake investment of €344 million in Software AG.

Following three years of successful transformation and with the benefit of Silver Lake’s unique expertise, going forward, Software AG will look to accelerate growth, supported by its cloud-native product set, further strengthening and extending its position in North America, and executing a strategic program of value-creating M&A.

By leveraging Silver Lake’s deep industry knowledge, relationships and experience, Software AG believes it can access more of its €61 billion Total Addressable Market (TAM), which is forecast to grow at a 16 percent Compound Annual Growth Rate (CAGR) between 2020 and 2026.

Software AG intends to double down on key areas of its existing strategy, enabled by its now fully cloud-native Digital Business product portfolio and its increasingly modernized go-to-market and customer success engines.

This activity will be supported by M&A to access new market segments within Software AG’s TAM, add complementary technology and go-to-market capabilities and expand cross-sell opportunities. It will also invest further in talent and the development of Software AG’s culture to ensure its growth is sustainable into the long-term.

“With Silver Lake as our partner, we welcome a world-leading technology investor that has a proven track record of creating value in software companies as they drive growth,” said Sanjay Brahmawar, Software AG CEO. “The combination of Silver Lake’s expertise and network and our Helix transformation will help us further capitalize on our rapidly expanding market opportunity. Silver Lake’s investment represents a strong endorsement of our strategy, our team and our future growth potential.”

Karl-Heinz Streibich, the Chairman of Software AG’s Supervisory Board, and Ralf Dieter, Chairman of the Audit Committee, will step down from office effectively as of January 31, 2022.

Christian Lucas, Managing Director at Silver Lake and co-head of the firm’s activities in Europe, and Jim Whitehurst, former CEO of Red Hat, will join the Supervisory Board as soon as possible thereafter. Based on discussions between Silver Lake, Software AG and the current Supervisory Board members, it is expected that Christian Lucas will be elected as Chairman of the Supervisory Board.

Under the terms of the agreement, Silver Lake is purchasing €344 million aggregate principal amount of 2% convertible subordinated unsecured notes due in early 2027 with an initial conversion price of €46.54 per share.

The conversion price represents a conversion premium of 20%over the closing price of the company’s common stock sale price of €38.78 per share on the Frankfurt Stock Exchange as of December 10, 2021. Software AG intends to use the proceeds of the transaction to invest in growth, support its M&A program, and enable the next phase of Helix.

“We are thrilled to be investing in one of Germany’s leading companies. Software AG is a great business, and we have been admiring the Helix transformation over the last three years, as Sanjay and his talented leadership team have laid the foundation for growth through transforming the product portfolio, reigniting the culture and shifting the business to subscription and SaaS,” said Christian Lucas, Silver Lake managing director and co-head of the firm’s activities in Europe. “This success from the first phase of Helix leaves us extremely excited to partner with Sanjay and his team as Software AG accelerates its growth journey. We look forward to contributing to the company’s future success.”

JP Morgan served as the financial adviser to Software AG in the transaction. Clifford Chance LLP acted as Software AG’s legal advisor. Skadden, Arps, Slate, Meagher & Flom LLP acted as Silver Lake’s legal advisor.

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