Investors who stayed with MSC when it went private could get a nice payout, even though we think the rumored price is low.
The reports point to private equity firm CVC Capital Partners as in “advanced talks” to acquire the company. MSC is a CAE pioneer; it was the first company to market the pioneering structural analysis work of NASA consultant Dr Richard H. MacNeal and Robert Schwendler.
The primary owners of MSC Software today are Elliott Management Corporation, a leading hedge fund, and Symphony Technology Group. The two led the investment group that convinced MSC to leave its status as a public company. Existing management was quickly shown the door and former Autodesk executive Dominic Gallelo was brought in as CEO. Gallelo remains CEO today.
What do we think?
The reports say the purchase price is in the neighborhood of $800 million. If this is the price, it will represent a 122% return on investment for the buyout investors, who acquired MSC for $360 million. Such a price suggests MSC is still struggling with declining revenues, the reason it left the public market. By comparison, a CAE company of similar employee size — Mentor Graphics — was acquired November 2016 by Siemens for $4.5 billion.