ServiceMax CEO gives the lowdown on GE Digital selling majority stake to Silver Lake

Profile picture for user ddpreez By Derek du Preez December 16, 2018
Summary:
ServiceMax was acquired by GE Digital back in 2016 for a whopping $915 million. GE’s performance has struggled in recent months and we heard rumours of a ServiceMax sale, which was confirmed last week. Silver Lake is now buying a 90% stake in ServiceMax.

Scott Berg, ServiceMax CEO GE Digital
Scott Berg, ServiceMax CEO

I met with ServiceMax CEO Scott Berg in London just a few weeks ago to get a strategy update on the company - which proved rather interesting. What I didn’t know at the time, and what Berg couldn’t reveal, was that GE Digital, the owner of ServiceMax, was in talks to sell a majority stake of the business to private equity firm Silver Lake.

At the time we discussed how GE has been having a difficult year convincing the market of its value and investments, but also how ServiceMax continued to grow and scale. We had heard rumours of ServiceMax being up for sale, just two short years after GE Digital snapped it up for a whopping $915 million, but nothing had been confirmed.

Fast forward to last week and it was revealed that Silver Lake, which has a broad portfolio of tech companies under its belt, was acquiring 90% of the ServiceMax business for an undisclosed sum. GE will retain a 10% equity ownership in ServiceMax.

By way of background, ServiceMax gained early traction in the field service management market by selling to OEM manufacturers that wanted to escape the break-fix scenario of field service management and instead move to the predictive maintenance of products. This resulted in customers then using data to sell their products as services (hence, servitization).

Since then, and under the umbrella of GE Digital, ServiceMax has been able to branch into new markets with the launch of its Asset Service Management (ASM) product, selling to asset operators (e.g. transport companies, oil and gas) seeking more predictive solutions.

A win-win

We got the chance to have a quick chat with Berg last week shortly after the sale was revealed to get the inside scoop on what this means for ServiceMax going forward. Berg was keen to reiterate a point made in our previous meeting that ServiceMax has largely been operating as an independent business unit inside GE Digital, which, he notes, is “good news” and will make for a “smooth transition”.

However, Berg was quick to add that GE retaining 10% was going to be beneficial for the business. He said:

“I think that’s really a good thing. I’ve been describing it to employees as a ‘best of both worlds’ scenario. I think the move gives us quite a bit of autonomy and independence by having an external owner, by reestablishing ServiceMax as a standalone company very quickly. But I do think the strategic involvement of GE, and even the investment percentages, is going to be extremely helpful to us, because we continue to have quite a bit of success with some of the GE Industrial business units and verticals, such as oil, gas and power.”

Berg explained that as part of the deal, GE has also formalised a resell relationship, which should give customers some continuity. He added:

“We’ve got some joint customers, especially between the field service management and APM (asset performance management). And it also extends the ability for the GE business units to continue to act as resellers for ServiceMax. I think it’s a nice balance of independence, but still with some strategic priority and relationship built into the structure of it.”

Berg said that over the past two years, under the ownership of GE, ServiceMax has been able to get a “jump start” on two fronts. One is simply increased investment in the business, for example, on things such as R&D, sales and marketing. For instance, ServiceMax’s sales team has doubled in size in the last 12 months alone. Secondly, the company has been able to expand into markets that it simply couldn’t reach before. This includes geographically, where it now has a full sales and service teams in regions such as the Middle East, as well as verticals, which include oil and gas. Berg said:

“Those things will continue, which is great. We now have the footprint of additional people - there will be no change to that. GE really helped us fund that expansion. Then, as I said, with the business units continuing to act as resellers, I think you’ll be able to see us continue to take advantage of those connections we’ve established with GE.”

A future with Silver Lake

So what about ServiceMax’s future under new ownership at Silver Lake? It’s clear from Berg that this investment is about scaling ServiceMax further, giving it the investment required to become a fast-growth SaaS company with an independent brand. The Silver Lake press release itself notes that there’s a $34 billion global field service management software market opportunity and that the majority of the 39 million field technicians globally currently don’t have access to any such software. In other words, Silver Lake sees the opportunity of a largely untapped market. Berg explained:

“I just think a private equity firm is going to be able to exercise and bring capital to bear for things like expanded partnerships and ecosystem plays for us. I also think down the line, we’ve had some discussions about acquisitions and expansions of the product line, which they would be willing and able to do.

“I guess it’s the agility of investment a private equity firm can bring to us. And think even if with some of our existing partners, I’m looking forward to a fresh set of conversations that can be prompted by Silver Lake, which has quite good relationships with people like Salesforce and some of the large systems integrators globally.

“I wouldn’t say it’s a reset, but a fresh dialogue with these companies, leveraging the relationships they have. I have been getting really positive feedback from both customers and near-term perspective customers about Silver Lake’s reputation in the market as a good growth minded investor that has a very successful track record in making spun out software companies into wildly successful entities on their own.”

My take

This is going to be an interesting one to observe. I’ve been following ServiceMax for years and have always been impressed by both the leadership within the company and its understanding of the opportunities within the market. ServiceMax was the jewel in the crown at GE Digital and it now has the opportunity, once again, with some financial clout, to go and make a greater impact on its own. We will be watching closely.