Schneider Electric

Company Update:
Schneider Electric has announced a definitive agreement to acquire PTC Inc., a listed industrial design (Computer-Aided Design) and lifecycle management (Product Lifecycle Management) software company.

The group will pay a total EV of €21.1bn, implying a multiple of 27x and 21x Adjusted EBITA on 2026E and 2027E financials.

This is an all-cash transaction, and the group will raise €5-6bn in equity through an accelerated book build and issue €16-17bn in debt. The group expects €250m in cost synergies and €800m in revenue synergies, with the former requiring €250m in implementation costs and to be achieved by the third year post-closing.

PTC generated €2.4bn in revenues in 2025 with an adjusted EBITA margin of c.40%. PTC's revenues are expected to grow at a CAGR of 10% up to 2029.

Following this acquisition, the share of Software and Service revenues will increase to 24% of the total on a pro forma basis. Combined with AVEVA, Schneider Electric's software portfolio will now be above the €5bn mark compared to Siemens' €6.8bn for FY26E.

In our view, the deal makes strategic sense as it gives the group access to the broader Industrial Software market, with a higher share of recurring revenue and margins that are already ahead of where AVEVA would be after its SaaS transition. We also find the multiple reasonable relative to the quality of the target acquired and compared to the software deals carried out by peers (notably Siemens).

That said, we believe this shifts the leverage back toward 3x EBITDA, which could concern the market. This is reinforced by the need to raise equity and pause the share buyback in 2027 despite reiterating the overall buyback (€2.5-3.0bn by 2030) and progressive dividend ambitions.

All in all, it fits the strategic rationale, but the market may worry about the ability to digest the acquisition and deleverage after closing.

Expert Opinion:
Unlike our analyst, we find the deal fairly expensive.  And we tend to believe the sector is currently highly fashionable because of the AI capex boom (bubble?) in the US  and therefore prone to value destroying deals.  With a stretched balance sheet, Schneider's ability to weather an unexpected economic downturn is more limited. Despite its intrinsic qualities, Schneider is too expensive and now too risky to our liking. 


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