Back in November, Autodesk (ADSK -1.34%) announced it had completed its acquisition of Spacemaker, which provides a cloud-based artificial intelligence (AI) platform that helps urban designers and architects save time, money, and materials. The $240 million all-cash deal was Autodesk's fifth acquisition and 13th investment in construction design solutions in the last three years. Acquisitions like these are important for investors to keep track of as Autodesk tries to dominate the architecture, engineering, and construction (AEC) software space.
Here's how the Norwegian start-up will fit within Autodesk.
Image source: Getty Images.
So what exactly is Spacemaker?
Spacemaker's platform is built to help urban developers and architects plan land developments. The value proposition is that designers can save time and improve outcomes for the many factors that go into successful property planning. Living quality, building density, and other variables can make or break large construction projects, and getting the details right during the early planning stages can potentially save building owners millions of dollars.
Let's say you're an urban developer planning a 300-room apartment complex on the coast of Norway. As you map out and design this expensive set of buildings, you'll want to analyze wind protection, density, living quality, and dozens of other factors. Weighing all these variables is difficult for developers to manage on their own. However, when their skills are augmented with Spacemaker's rich datasets and simulation capabilities, those site plans can be optimized, with the designer getting advice from the software as they go.
As you might expect, this can be an extremely valuable service. Autodesk highlighted in the acquisition press release some Spacemaker case studies where companies saved millions of dollars using it. And if Spacemaker can save companies boatloads of cash, Autodesk will likely be able to charge a premium for the ability to use it.
How it fits in with Autodesk
Autodesk sells dozens of services to architects, engineers, and construction workers. These include AutoCAD (2D and 3D design for engineers and architects), Revit (design and construction management), and Civil 3D (design and construction tools for civil engineers). The company frequently bundles its services together, depending on customer needs.
Autodesk already has thousands of architects and designers as customers, which gives it an advantage in monetizing its newly acquired Spacemaker platform. Spacemaker will also likely be bundled together with other architectural and design products, which should help increase customer count and build a better value proposition vs. any competitor. As Haukeland said when asked about the acquisition by TechCrunch:
[W]e understood that this can put our vision on steroids and we can really reach that vision much faster. And that's what drives us, that's what we want to do: We want to realize our vision and get our offering out in the world, at the hands of millions of architects and engineers and developers.
Investing takeaways
While the public didn't get to see any of Spacemaker's financials (the company was private, so it didn't have to disclose anything), a $240 million price tag does not seem outlandish for Autodesk. Once the product gets bundled into its other services for architects and designers, its customer count should grow as long as the value proposition stays intact.
Right now, Autodesk trades at 19.2 times sales and has a price-to-free-cash-flow ratio over 50, meaning investors will have to pay a premium if they want to buy shares in the company. However, if you believe that acquisitions like Spacemaker are helping it build a moat against other AEC software firms, it might not be too late to hop on the Autodesk train.
