A leader in data integration for the modern data stack, StreamSets, has been acquired by Software AG. With this purchase, Software AG gains a significant and quickly growing SaaS and subscription company, with StreamSets' revenue rising at a four-year CAGR of more than 70% through 2021.
Customers can transport data smoothly and securely to and from any element of their digital backbone developed by Software AG's Digital Business portfolio across hybrid and multi-cloud environments, using StreamSets' enterprise-grade data integration platform. Companies can better unlock and extract value from data as it travels across on-premises applications, data streams, SaaS apps, legacy data stores, and cloud data platforms such as Amazon RedShift, Databricks, and Snowflake with this combination. In addition, smart applications and the linked organization will benefit from the integrated hybrid iPaaS platform, which will supply consolidated, conforming, and continuous data.
"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."
Sanjay Brahmawar, Software AG CEO
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 purchase is the first step in Software AG's M&A strategy, which aims to boost growth by gaining access to new segments of the €61 billion total addressable market. In this situation, Software AG will enter the cloud data integration section of the more significant data integration industry, which is expected to increase at a rate of 26% annually to $3.5 billion by 2025.
StreamSets' technology collects, consolidates, and transfers data from across this landscape as well as a wider variety of datasets, including edge and process data, where Software AG's current Digital Business portfolio links a hybrid application environment and integrates transaction data inside it. This necessitates smart data pipelines capable of understanding the structure and meaning of the data traveling through them and transporting it to a variety of hybrid destinations, including current cloud data warehouses, data lakes, messaging systems, and event hubs. In this approach, the StreamSets DataOps Platform provides business clients with current data pipeline technologies to handle a critical aspect of the hybrid integration difficulty.
In addition to a tremendous technological match, StreamSets' go-to-market strategy complements Software AG's. Both parties are aiming for the same business client segment and purchasing personas in the same IT purchasing region. The cultures of the two organizations are also quite complementary, blending the 'agile start-up' with the '50 years bold' global software corporation, but with a common focus on innovation, customer success, and growth.
Value creation
Software AG expects to contribute value to the purchase in three ways, in addition to benefiting from StreamSets' strong standalone growth. StreamSets' very complementary offering will first be sold to the group's own worldwide hybrid integration client base. Second, starting in the iPaaS domain, it will build collaborative solutions and use the organizations' go-to-market alignment to bring these product offerings to market as a single entity. In 2021, Software AG anticipated the synergy revenues generated by these first two levers to exceed StreamSets' standalone revenue.
Third, in addition to the top-line synergies, Software AG will use its operational scale to assist StreamSets is growing considerably more effectively, resulting in a significant boost in profitability while continuing to develop at a rapid pace.
These elements, when combined with the strategic fit and market environment, give the Group strong confidence in StreamSets' ability to maintain high double-digit revenue growth while also being non-IFRS EBITA margin accretive in the medium term.
Financial overview
Funding and purchase price
The purchase price includes €524 million in cash, plus a standard retention package agreed upon and paid to StreamSets top management, as well as transaction costs. Cash and the group's existing credit facilities will be used to fund the acquisition.
Further accelerating growth
Software AG's organic business is expected to fulfill its guideline for 2022 and objectives for 2023.
In addition to organic growth, the integration of StreamSets Software AG is expected to boost non-IFRS Group product sales by 12 to 16% in 2022. In 2022, the group anticipates a negative impact on non-IFRS EBITA of between -€17 million and -€13 million.
In 2023, Software AG anticipates the acquisition to contribute to organic growth. The group anticipates overall revenue to be well ahead of its €1 billion objectives with the addition of StreamSets to the organic business.
The impact of purchase price allocation is not included in these updated calculations. Following the closure, the group will offer another update.
The group will keep you informed about its underlying organic business performance.
Regulatory clearances are required for the acquisition. The transaction is anticipated to come to an end by the end of the first half of 2022, according to the group.