Siemens acquires PLM leader UGS

To bridge the gap between the physical realm of the plant floor and the virtual world of product design, Siemens AG, the Munich-based global conglomerate, has acquired UGS, a leading provider of product life-cycle management (PLM) software and tools. The deal is estimated at $3.5 billion.

UGS will become part of Siemens' Automation and Drives (A&D) business.Siemens asserts the A&D unit will be the first supplier to offer “a comprehensive, technologically consistent product portfolio” with both hardware and software to support “the complete life cycle of products and production facilities.”

“What it really means for our customers is the process from having an idea to bringing it down to the manufacturing floor and putting products out is significantly shrunk,” says Dr. Klaus Kleinfeld, president and CEO of Siemens AG. “It's more reliable, faster, and cheaper. That's what our customers want.”

While Kleinfeld predicts synergy on the sales side, analysts are far from unanimous in assessing the deal's outlook.

“It's something of a cliché, but success of this merger will depend heavily on execution,” says Joe Barkai, program director for discrete manufacturing research at Framingham, Mass.-based Manufacturing Insights. “These are two very different companies with distinct cultures and operating models. The odds of success will improve if Siemens affords UGS some independence and keeps the management team in place and free to continue on what has been a successful track.”

Challenges include Siemens' relative lack of experience in selling enterprise software. On the other hand, the lure of these higher-growth markets could be exactly what motivated Siemens, Barkai acknowledges.

“There is plenty of upside in terms of UGS engineering contributing to the large product-development group within Siemens, as well as with the Tecnomatix piece of the UGS business,” Barkai says. Siemens has deployed UGS Tecnomatix, a production modeling and execution environment, in some discrete industries.

“UGS and Siemens have little application functionality overlap, making the joining of the two companies quite complementary,” a report from Boston-based AMR Research concludes. “The financial security that Siemens offers will allow UGS to target new product development without distractions—and Siemens' discrete clients will now have a single point of access to a world-class, design-to-manufacturing capability.”

Siemens A&D is an experienced mergers & acquisitions hand, having completed at least 11 acquisitions in its history, including several in the last few years.