IHS CEO Announces Plans to Sell off EH&S Software Assets by Divesting the OE & RM Product Line
During the IHS investor day on October 7, Jerre Stead, who returned to the CEO role at IHS in July 2015, announced that the firm has hired Evercore to lead the divestment of the EH&S software assets which sit in the operational excellence and risk management product line. The decision was taken after a portfolio evaluation determined that the EH&S software assets - bought for between $200 million and $300 million between 2007 and 2012 – were no longer aligned with the strategic goals of IHS. The firm has not disclosed any timeline for the divestment. Part of the rationale for the decision is the high level of private equity interest in the EH&S software segment as evidenced by the buy out / growth capital investment by JMI Equity in Intelex and the purchase of Enviance by Battery Ventures. Jerre Stead conceded in the investor presentation that the software model is not a good fit with IHS objectives for organic growth as an information solutions provider.
For IHS customers the news of the planned divestment will inevitably create short-term uncertainty. The sale process will take a minimum of 6 months and it may be a year before customers have clarity about the new owner of the EH&S software assets. Verdantix believes a buyer is more likely to be a private equity investor than IBM, Infor or Oracle – the most likely corporate buyers. The challenge for the buyer will be the cash needed to upgrade the legacy applications that IHS has bought over the years and integrate them into a single platform which can compete with the new breed of integrated EH&S and operational risk management platforms. Without such an investment, the business will not achieve the 30% to 50% growth rates that a financial investor would require. A second challenge for a potential buyer is managing the exposure of the IHS EH&S software business to the oil and gas sector.
The potential curve ball for competitors would be the purchase of IHS by one of the larger private equity backed EH&S software providers. This would create a clear market leader in terms of customers, revenues and employees. The integration challenges of such a deal should not be underestimated but it will be under consideration in London, New York and the San Francisco Bay Area.
For further details on the EH&S software market attend the forthcoming Verdantix webinar: ‘2016 Predictions For EH&S Information Management: Platforms, Mobile, Analytics & Acquisitions’ on Thursday November 5 at 4:00pm GMT.