By Mel Duvall

Software AG launched a bid Monday to take over fellow German software company IDS Scheer in a deal valued at about $666 million. The combined company will be a global leader in the market for business process management software.

In a phone interview with CIOZone, Software AG Chief Product Officer Peter Kuerpeck, talked about the merits of the deal for both companies.

Q: This is an interesting acquisition, in part because IDS Scheer founder August-Wilhelm Scheer has in the past ruled out a sale. Why this deal and why now?

A: They have had a bit of a struggle in terms of growing revenues and sustaining margins . . . and we have known them for quite some time, and already had a strong partnership. We were able to put forward a very compelling offer by saying lets bring your business process expertise and software tools together with our platform and form a $1.5 billion to $2 billion company. I think they've seen a lot of offers of late, but we were able to put forward a strong case. And we are offering a pretty decent premium to their stock price. (Software AG's offer of €15 per share was a 39% premium to the closing price Monday).

Q: Why does IDS Scheer make a good fit for Software AG? How are the product portfolios going to come together?

A: We acquired webMethods (based in Reston, Va.) two years ago which gave us a strong portfolio when it came to process automation, SOA (service oriented architecture) integration, ESB (enterprise service bus) . . . and all those areas. It gave us a very good offering, but it was still very horizontal. It was not easy to help customers when it came to understanding their vertical problems and carving out how we could help them in their specific verticals. That role was filled by system integrators and the like. So, we were looking for somebody that could help us in that area . . . and being a product company we were looking for what kind of a product could help us close this gap and transform us all the way into a one stop solution.

So IDS Scheer was a perfect fit because for 20 years or more they have built tools and aggregated vertical expertise around how you use their tool set in various industries.

Q: IDS Scheer is certainly well known in Europe and Germany in particular, but less so in the U.S. What is the cocktail party summary of what they do?

A: They do two major things. First, they have a business line called ARIS, which is a tool set that allows companies to do high-level business strategy process modeling, from the CEO or senior executives and trickling down all the way to the execution level.

On the other hand, they have a strong consulting arm which is focused both on process consulting and SAP consulting. They do have a strong footprint in the SAP space and do a lot of SAP implementations using their tools. Customers use their ARIS tool to find out what they want to do, then map it into the SAP solution.

Q: Software AG has a large U.S. presence and a sizeable headquarters in Reston, Va., but IDS Scheer is not as well known in the U.S. marketplace. Do you see this as being an opportunity to expose IDS Scheer to a larger potential customer base in North America?

A: Absolutely. The sum of the parts (the combined company) will have about 30% (of revenues) from the U.S., 28% Germany, Austria and Switzerland, 34% (the rest of Europe) and 8% Asia Pacific. So, the Americas will still represent 30% of our business which is pretty significant. But we do see this as an opportunity to grow market share.

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