Good morning, good afternoon, and thank you everybody for your continuous interest in Schneider Electric and joining us in a short notice. We are pleased to welcome you today to discuss the definitive agreement announced earlier today for Schneider Electric to acquire PTC. As a reminder, we are in a quiet period ahead of our Q3 earning call, and we will therefore not be commenting on our current performance.
Joining me today are Olivier Blum, our Chief Executive Officer, and Nathan Fast, our Chief Financial Officer. During this call, we will take you through a presentation outlining the strategic rationale for the transaction. As usual, the presentation materials, together with the press release issued earlier today, will be available on our website following the call. I will now hand over to you, Olivier and Nathan, who will discuss the transaction in more detail before you open for Q&A. Olivier, over to you.
Thank you, Antoine. Good morning to all of you, and thanks for being with us. Indeed, it's an important announcement we are making today. I will go straight really in the why we are doing this acquisition with PTC. First of all, what has been very obvious to us, the market has evolved in the past year. We have seen acceleration of energy everywhere, acceleration of digital, and we have seen our customer, and that's the most important, accelerating their transformation, their digital transformation, looking for more productivity, more efficiency, more resiliency, more sustainability.
With a very strong conviction that technology, digital, and AI will be the answer to achieve their business goals. By combining the strengths of Schneider Electric, and of course AVEVA, Cognite, and now PTC, we believe we create really a very strong powerhouse in software, AI, and digital that can be scaled over the coming years. We believe we create a unique platform which is open and interoperable for customer, where we can deliver strong business outcomes.
At the end of the day, what is very important for us, and I will come back on that, we create a unique digital system which is based on design, control, data, and intelligence. Our vision at Schneider Electric, and I will come back on that also, again, has been always that the world will be more electrical, more digital in the future, and the only way to deliver efficiency to our customer will be really to bridge the physical and the digital world.
You've seen what we've been doing in the past 10 years. You've seen how technology has evolved, and we believe we are really at this time in our history, but in our industry as well, where you really can accelerate all the benefits to your customer if you are able to provide the digital system across the life cycle from design and build to operate and maintain. By doing that, together with also the acquisition of Cognite, which you know is still between signing and closing, we believe we create a unified digital thread that can really help our customer across product, machine and processes and energy system to accelerate the creation of energy and industrial intelligence.
We've started. It's not that we are starting tomorrow, but we believe that everything can be accelerated. Of course, by combining those two companies, you create a lot of opportunity for cross-selling synergies. We broaden the end market exposure for the two companies by increasing our leadership in energy and industry, and we can help both companies to grow faster. Last but not the least, that combination help us to continue to bring high quality recurring revenue, supporting the realization of our digital flywheel ambition, as we explained to you during our Capital Markets Day, and contribute well to the financial profile of Schneider Electric.
We'll come back on that, both on margin and cash generation standpoint with Nathan later on, which we believe at the end of the day is a compelling story for our shareholder from a value creation standpoint. Now, we've not started today. As you know, it's a little bit of history for all of you to keep in mind where we come from. PTC complement the unique portfolio Schneider Electric has built step by step. I've told you that our ambition, our vision, has been always to connect the physical and the digital world to generate more efficiency and sustainability for our customer.
This is our mission. Of course, the first milestone when we created EcoStruxure, which was really to make sure that every single product control system of Schneider Electric will be more digital in the future. We have accelerated big time when we've made the acquisition of Wonderware from Invensys in 2013, then AVEVA, which has been probably the biggest milestone in our industrial software journey, but also with ETAP, which has brought a lot of design and engineering capabilities in energy system.
Of course, we realized together that if we want to benefit in the future more from data, more from AI, it was an absolute must to get closer and closer to the data. That's why the PI System, which was really absolute reference in the market of the industrial world, was very critical bridge in building our vision. Of course, I'm not going to come back to what we announced in July. In the world where AI is becoming extremely important, it was very important that we put Schneider Electric in the leading position at the contextualization layer.
What Cognite will bring to you is basically lots of capability, knowledge graph, to be able to contextualize data and to build the next really generation of industrial AI. Now, very logically, when we enter in this transaction with PTC, we bring the last brick in our portfolio, which is product and engineering intelligence through CAD, PLM, ALM, and SLM. Let me explain to you a bit more in detail what it means for us. I am going to introduce briefly PTC that you know probably well. Very large company, having leading position across all its end markets. Very strong position in CAD, PLM with product like Creo, Windchill, which are among many other, but very strong leadership brand in the market.
We will come back a little bit more on the financial later, but PTC has demonstrated strong financial performance, growth, profitability, cash generation. They have a very strong position in the U.S., but also in other geographies covering different end markets, and they can benefit from 7,000+ employees who are extremely capable in digital AI across the world, mainly in the U.S. and India. It is a very strong company that we have been observing in the market.
We have seen how they perform, we have seen how they have evolved in the market, we have seen how they have started to build their AI orchestration layer. We believe that beyond everything that I am going to talk about on the technology, on the strategy side, there is also a very strong cultural fit between the team of PTC, AVEVA, and Schneider. I think we speak the same language with the same vision for innovation, for impacting the world thanks to all our solutions.
Now let us go a little bit more in the detail of the strategic rationale and what is our vision. Our vision, as I said, is really to connect the physical and the digital world. Everything starts from the assets, and you know what has been the EcoStruxure story of Schneider Electric, having really this absolute obsession to make sure that every single product, machine, processes, energy system is connected, where we can extract data. Building application on top of it that run to make those assets more efficient across the life cycle.
As we have all understood in the past year, data becoming a very critical layer if eventually you want to benefit from AI technology to deliver more value at the enterprise level. What we mean more value at the enterprise level is to be able to help enterprise to make decision, to act, to deliver business outcome. Making sure that AI will help you basically to generate those business outcome from the enterprise level, but go back to the physical layer. That is really our vision. When we see the evolution of technology in energy, in process, from IoT data and AI, we are really at a time where this vision is possible.
Was not probably the case five years ago, but now all the technology are making it possible. In order to be able to deliver that vision, we strongly believe that you need to provide to your customer a very structured set of digital systems. What I mean a set of digital system means that on top of the asset, it's important that you help your customer to design, to control, to have a very strong data fabric, and to build a very strong intelligence layer to act and make decision.
That is basically the way we have seen really the construction of our portfolio over the past years and even today when we announced the acquisition of PTC. If we go a little bit more in detail on those systems, we believe that at the design stage, it's super important that you can help your customer to design both product, machine, processes, and energy system. This is where we see CAD engineering very critical part of the portfolio.
On the control layer, this is a place where we have been present, Schneider Electric, with leadership position in power and industrial SCADA, with MES, with machine automation, and that's a place where Schneider Electric has been present creating leadership position. When you go to the data fabric layer, as I mentioned, we understood that having a very strong internal historian with PI System was absolute must to succeed in the future. We've also understood that if you want to create very strong data fabric, it's also important that you can be present across the life cycle of the product with PLM, ALM, and SLM.
Last but not the least, and that's something that I presented in July when we made the acquisition of Cognite, when we announced the acquisition of Cognite. We understood that creating the next level of intelligence will be possible if you are able to have those capabilities that will contextualize those data, that will be able to make those data AI native, on top of which you can build knowledge graph foundational model that would deliver the value that you want to deliver to your customer.
Which is ultimately creating eventually autonomous agents for automation energy system and/or, I would say, orchestration layer, which we are starting to do both on the Schneider and the PTC side already. In order to be able really to build this vision and to make it real for our customers, so a very strong system for design control, data fabric, and intelligence.
You understand very logically that there were two pieces which were critical seen by us for the future to have one of the most comprehensive portfolio, the CAD layer, the PLM, ALM, and SLM, which are really the different pieces, which help us really to complete systems of design control and data fabric to make sure we can deliver stronger outcome for our customer. As you can see on that slide, we position where Schneider Electric has been. It's very important on that slide to insist on the fact that we are not building a system which is a closed system.
It's a very open system, which is interoperable for our customer. Starting from the physical layer, we want our customer to make the most of this connection of physical and digital, both with every single piece of our portfolio when it comes to EcoStruxure asset, but also third-party ecosystems. When we enter in a customer place, we are here to help them to deliver their business outcome, to deliver their objective, whether it is Schneider or non-Schneider product. You can see that on the design stage, we have already very advanced capability with AVEVA Unified Engineering, which has created leadership position in the market.
With ETAP in energy system, and here, we said it many times, but important to remind to everyone that what makes also Schneider Electric very different is unique capabilities both in energy and in process. On the control layer, as I said before, extremely strong leadership position, thanks to the portfolio we have both with Schneider EcoStruxure, AVEVA, and ETAP. Now, when we go to the next layer, we complete, of course, what we have done, I said it already, with AVEVA and PI System.
When I go to the next level of intelligence, today, I want to also mention that we have already built capabilities with AVEVA, even before Cognite. We know that PTC has built strong AI capabilities as well. But our vision for the future is that what we call the data cube in the CMD, which will become really a reference in the market, where our customer will be able to unify their data around the data cube, could be powered and amplified by Cognite.
We believe that Cognite could accelerate what AVEVA has started to do at the AI layer, and we believe it could be the same for PTC. When we complete all of that, we believe that together with PTC, we create one of the most comprehensive digital systems of our industry. I insist really on one point, an open and interoperable ecosystem is very important for us. Giving the choice to our customer to enter from any part of that ecosystem, but of course, benefiting from a company that could create a unique digital thread across all those different bricks.
You see clearly, again, on that slide what PTC bring to us, product design and product lifecycle management capabilities. What is very important at the end is when we say that all of that, if I try to oversimplify, what we want is, we want really to deliver trusted energy and industry intelligence at every level. Really helping our customer to make decision, eventually to make sure that it can be autonomous agent that can make those decision.
But we are combining really the Schneider Electric strength, how it runs, how we use energy, how we run process with the capability of PTC on how it was designed and built. When we are able really to deliver this system of design across the different layers of digital, we believe we can really help our customer to have this loop where they can verify and improve, they can act at the control layer, they can understand, and they can decide at the enterprise level.
But let's make it clear, it's not only deciding about at the enterprise level, it's to be able really to have also all this intelligence going back to the physical world to make sure that at the shop floor level, you can act also autonomously to improve efficiency, productivity, resiliency, and sustainability for your customer. We have on the next slide a couple of example. We don't have time probably to describe all of them, but just a few of them. We combine, for instance, with the first example, for an energy storage manufacturer.
When you combine the capabilities of ETAP in electrical design and we embark that from the early stage of the mechanical design with PTC, we believe we can create unique value. For a machine builder, for instance, when we combine the capabilities we have with Automation Expert and PTC, we can inject open software-defined automation from the early stage and improve the efficiency. And the same will be really with all our power automation capabilities. In data center here, and even you can say for Jensen, we see very well that whether it's with EcoStruxure AVEVA, when we combine with PTC, and I said it in my presentation, we can really enable autonomous operation, thanks to Cognite.
So we have multiple example like that we believe that are creating very strong case for complementarities and synergy, and at the end of this, strong benefit for our customer. So when we make this acquisition, if you look at what is the addressable market from a software standpoint, we multiply by three the accessible market for Schneider Electric in the industrial software world, including, of course, the total accessible market coming from PTC, mainly CAD, PLM, as well as ALM and SLM.
So it's a very strong addition from a market accessibility standpoint. If we want really to summarize on that slide what are the strong complementarities between Schneider Electric and PTC. As you understand, we are closing our portfolio gap at the product lifecycle level. That's very important. This is what helps really Schneider Electric to go to the next level. This is the place where PTC has a very strong leadership capabilities.
When it come to product asset data and AI, we believe this is a place where the two company can help each other to go to the next level of AI contextualization, and therefore more benefit for the customer. And of course, when it goes to the industry coverage, this is where we complete our position from discrete to process with very strong position in the different market. When you look at the combination of Schneider, and every time I say Schneider, of course, I mean Schneider, AVEVA, and PTC, that make a total size of our software associated business representing 24% of our group revenues, if you take 2025 as a reference, which mean five point more compared to what was Schneider Electric stand-alone.
On one side, of course, as you can understand, a very strong contribution to our digital flywheel, but even more important, showing that it create a very strong software, digital, and AI powerhouse in the market that can really scale and make the difference for our customer everywhere in the world. Very strong recurring revenues portfolio, 89% of that portfolio being recurring, which is extremely good from a business standpoint, of course. And a very customer base supported by extremely competent people across the different part of the world, between Europe, between U.S., and also with a lot of engineering capabilities in India.
At the end of the day, one of your question will be what really make us different. I do believe our major differentiation come from the fact that we are open by design. It has been always a philosophy, I can say, since I've joined this company, to be always open by design. Every time we develop system, we bring offer to our customer, we don't want to constrain them. We want to give them the capability to be agnostic, to be able to work across different vendor, both in software and hardware. But of course, because we have more capabilities than the average, we believe we can bring more value to our customer.
Being open, interoperable by design is truly important for us. We do believe the strong major differentiation is we are really on the way to build the next generation of industrial AI. It's not anymore a vision. We are not anymore only at the data layer. We are now in the world of AI with one of the most powerful contextualization layer of the industry, and this is really a strong testimony that we have from all the customer of Cognite that we can bring now, of course, across the different layer of our foundation from product, asset, and energy.
Last but not the least, we want to be able to help our customer on their biggest challenge, on where they want Schneider Electric to help them as a technology partner, both on energy side, which is definitely one of the biggest priority for all organization on the planet, but of course, on the process side, to make their operation more efficient. Last but not the least, of course, we are able to bring those energy and process capability across all end markets of Schneider Electric and PTC, which are building data center, industry, and infra market.
We summarize on that slide a lot that I've said already. Very strong complementarity when it comes to the geographical reach. A strong complementarity on the product offering, from product design, engineering, and service to operation data, to contextualization and install base. As I said already, a strong complementary on the end market where we both help each other to access new market everywhere in the world. At the end of the day, of course, this strategic vision makes sense only if we deliver strong results, and I'm going to hand over to Nathan to share more with you first about the synergies and the financial of this transaction.
Thanks, Olivier, and good morning, good afternoon. The strong strategic intent that Olivier just spoke about makes us highly confident in achieving significant synergies. We expect EUR 250 million of cost synergies to be generated in the next three years with approximately EUR 250 million of one-time implementation costs. Just to give you a bit of flavor, we have identified areas including U.S. public company costs, procurement savings by leveraging the whole Schneider Electric platform, and select infrastructure savings such as IT costs. Additionally, we have EUR 800 million of revenue synergies clearly defined through three levers.
Cross-sell software offerings into complementary footprints, so having access to discrete and hybrid customers for Schneider's portfolio and process and hybrid customers for PTC. Extend channels and market access by leveraging our large network of partners. Finally, AI-enabled digital threads such as agentic lifecycle workflows as well as product, operations, and energy intelligence. As presented at our last Capital Markets Day, Schneider Electric is on an exciting financial trajectory, combining superior growth, profitability, and cash generation. PTC is immediately accretive to Schneider Electric across all three financial metrics.
First, PTC approximate 10% organic ARR and revenue CAGR in the medium term with a high quality and recurring profile that Olivier already mentioned. Second, it brings approximately 85% gross margin and 40% adjusted EBITA margin before synergies. Finally, PTC cash conversion is above 100%. The result is accretion across growth, profitability, and cash generation before considering synergies. What we present to you today is a compelling transaction with significant value creation. We are acquiring 100% of PTC for $205 per share in cash, implying approximately EUR 21 billion of enterprise value. The transaction is valued at approximately 13x adjusted EBITA, including full run rate synergies.
The value creation base case includes, as I already mentioned, EUR 250 million of cost synergies and EUR 800 million of revenue synergies. We are confident in delivering strong value creation for our shareholders across these metrics. Moving to financing. The acquisition financing is secured through a full committed bridge and will fund the transaction with a mix of EUR 5 billion- EUR 6 billion of equity and with new debt.
We are expecting closing by Q3 2027. Of course, it will be subject to customary regulatory approvals and a shareholder vote at PTC, which will require a simple majority vote. The transaction will create substantial value for our shareholders. First, and as just presented, PTC will be accretive to our financial profile and our digital flywheel. The estimated 2027 adjusted EBITA multiples step down from approximately 21x before synergies to 17x with cost synergies and 13x with all synergies.
We expect the transaction to be immediately accretive to adjusted EPS before PPA in year one. That is low single digit with phased synergies and mid to high single digit, including full run rate synergies. Finally, the transaction ROCE is expected to exceed the WACC by year five, including full run rate synergies. The transaction financing is consistent with our 2025 CMD capital allocation framework. The total cash consideration of EUR 22 billion is guaranteed by a bridge that is fully underwritten by banks.
We expect to finance the deal with EUR 5 billion- EUR 6 billion of equity that will be raised in the form of an ABO, and EUR 16 billion- EUR 17 billion of senior debt that will be conducted across several currencies. In all of that, our four capital allocation policy pillars remain unchanged, with a commitment to our category A credit ratings, a commitment to our progressive dividend policy, a confirmation of our active portfolio management, and a confirmation of the total quantum of our 2030 share buyback program with some pause over 2027 and 2028. Olivier, with that, maybe I'll hand it back to you for some closing comments.
Thank you very much, Nathan. As you understand through the presentation, this acquisition is for the really logical next step that further enhance Schneider Electric strategically and financially. We believe we are really creating a unique digital thread to meet the future of energy and industry intelligence. Of course, we believe all the value creation in front of us that can start immediately. As you understand, we go through definitely a period of regulatory where all company will continue to operate separately. But once it's done, I do believe we can really create a lot of value immediately for our customer. It's pretty much in line with what we told you during our CMD.
We are transforming our company strategically, operationally across three dimension. Having a strong technology leadership is really what will help Schneider, I think, to differentiate industrial intelligence. Customer differentiation, which is really how we bring really all the value of that portfolio to our customer globally, regionally, locally. There are different type of go-to market, and that's what Schneider, I think, can deliver through its regional model, but also being able to engage at enterprise level.
Last but not the least, of course, with a very strong focus on operation excellence, and you have seen that already in our H1 results. We believe we can continue to deliver strong value to our shareholder. I would conclude at the end of the day that the conviction that we have made is also really based on the quality of the people. The quality of the people we have seen at PTC under the leadership of Neil Barua, who has really created a very strong company.
Not created, I should say, but who have delivered very strong performance in the past cycle. We had the opportunity to get to know them, to have a lot of feedback from customer. When you combine that with the strengths that we have created together with AVEVA and the leadership of Caspar, where we've transformed really the company from the time of acquisition.
Two more also with the great capability that we have in Cognite. I do believe we have the right people really to deliver on the next value creation for both our customer and our employee and of course, our shareholder. We are excited. It's a lot of work in front of us now, but it's an exciting time really for Schneider, I think, to get prepared for this next level of industrial and energy intelligence. Antoine, over to you.
Thank you, Olivier. Thank you, Nathan. Look, we have covered a number of key aspects of the transaction and hopefully addressed many of the questions that you may have. Given the time, let's move straight to the Q&A. We have around 30 minutes remaining, and we would like to use that time to address as many of your questions as possible. As usual, same ground rule, please, one question per speaker. With that, operator, please open the line for questions.
Thank you. The first question is from James Moore of Rothschild & Co.
Hello, James.
Mr. Moore, perhaps you have your line on mute? Okay, the next question is from Martin Wilkie of Citi.
Thank you. It is Martin from Citi. A question just on the timing of the deal, and obviously, the share price of many of the industrial software companies have de-rated over the last year or so. You mentioned you have been looking at PTC for quite some time. I would be intrigued just to find out how you thought about this over time, given the de-rating in the share price over the last year or so.
In particular, how we should read into that, how you see this whole debate about the SaaS pocalypse or the fear about the changing pricing model because of moving from potentially user-based software pricing towards task-based, outcome-based, things like that. Just to see how you thought about that whole debate about how you get the value from the software in the future. Thank you.
Thank you very much. I get there are some supplements in your question. First of all, for Schneider Electric, what was really important is to make sure that we are here strategically on one of the bricks, which are very important for the future success. As you know, last year, we have explained to you during our Capital Markets Day how we want to bring the next level of industrial and energy intelligence. What was very important also for me, because I hear also from you, there is a bit of a question on timing.
Last year, the priority really for the company was really to make sure we are clear about where we want to go, to make sure we turn around the company from an operational performance, and we really go in details to what will make Schneider Electric very different in the future. We came really to the conclusion that definitely building a strong AI contextualization layer will be extremely important, and complementing our capability in product design engineering will be also an important one.
Now, once you have said that, there are stuff you can do organically, stuff you cannot do organically, and it was very obvious that PTC came as a very strong candidate to complete this portfolio. Then maybe I will let you complete a little bit more on the rest of the question, Nathan.
Yeah. Maybe, Martin, I will step through the next two, because you asked about three questions inside there. I guess from a pricing perspective, the way we think about the software pricing model is more that the seat and flex credit models are probably complementary. Whereas on life cycle applications, the seat base remains the industry standard, and for the operational flex credits is working for the AVEVA team. So we would expect to keep and maintain both those models, and it provided us with some flexibility, in fact, on monetization of AI use cases going forward.
Then you asked your very first question on value, and I think from a value creation perspective, as you mentioned, we have studied this business over some period of time. I would say we have exhaustively assessed the value creation of the combined entity. I mentioned PTC has highly accretive financials, but I think it goes beyond that with the value creation that we can create with a fully integrated platform that includes revenue synergies and cost synergies, of course. Furthermore, I guess from a value creation, it is not just based on their trading value at an arbitrary point in time, but we are looking more at the long-term intrinsic value of the company, and that is what gets us comfortable there from a value creation perspective.
Great. Thank you very much.
Thank you for the question. Operator, can we take the next one, please?
Certainly, sir. The next question is from Andre Kukhnin of UBS.
Yes. Good morning, everyone. Thank you very much for taking my question. I just wanted to go pretty much back to basics and just think about the convergence of process and discrete, and what you've got there in process, and you going entirely into discrete with this deal. Could you just help us to understand how exactly you're going to mesh these two together with these sort of not fully overlapping or likely overlapping customer bases, and how does that help with synergies creation here, given that lack of overlap?
Then maybe just as additional point, with two large deals being done at the same time, Cognite and PTC, could you help us understand how this will be actually managed internally? Who will be the key owners of these transactions within the Industrial Automation business?
Sure. Thank you for the question. Maybe I'll start quickly by the second one. So you know that the way we've been managing this business in the past year with the acquisition of AVEVA and PI, it was always to create a dedicated industrial software vehicle, which was led by Caspar. We want to continue to have, once of course, we go over the period of closing for the company you've mentioned, so Cognite first and then definitely continue to have one vehicle. I just want to insist that it will take a couple of months, and we are saying probably Q2 next year for the closing, that the company will continue to operate.
But definitely during that time, we work together with the management team on how to create a very strong software vehicle. A software vehicle which will have different capabilities, because even if it's one software vehicle, you want the different piece of the portfolio of AVEVA or Cognite to continue to deliver strong value to the customer. As I said before, we want to be open and interoperable, so it's about giving the choice really also to our customer, but definitely building strong synergies.
Last but not the least, we want definitely the software vehicle to be really the power, software power of Schneider to take basically everything we do in energy management, in electrification to the next level when it comes to AI. So for instance, and something we presented in July, and I presented in my slide today, Cognite will be definitely the AI foundation for everything we do in energy management in the rest of Schneider.
So it will be an independent software company, acting, working as a software company, very strong focus on digital and AI capability, but being also the strong vehicle that will transform the rest of Schneider, I think, from a digital and AI standpoint. Coming back to your first question, I don't see what— I f you have something specific in mind, but what is very important, if you just take the example of synergies that we have presented in the document. We see a certain number of cases where the design engineering capability for product is extremely important.
Let's keep in mind also that we are moving into a new world where data will be extremely important, where product will be more and more software defined. The company tomorrow that can, at the early stage, really combine mechanical, digital capabilities, and being able to manage that across the life cycle will make a lot of difference in the market. We see, by the way, for us at Schneider, in the way we develop our product, but we see also that for all the customer of PTC.
Bringing those capabilities together, we believe, will help us to go to the next level of intelligence. What we mean by the next level of intelligence is being able to capture those data, to manage them across the life cycle, to deliver more value for a customer. At the end of the day, it's also about all the cross-selling we can do in discrete between AVEVA and PTC, which will be also a strong value creation together with SCADA.
Thank you.
Thank you, Olivier. Thank you, Andre. Operator, can we take the next question, please?
Yes, sir. The next question is from Ben Uglow of Oxcap.
Yeah. Good morning, everyone. Thanks for taking the question. I am interested in, given that AVEVA and PTC are somewhat similar companies, could you say a little bit about the practical aspects, whatever you can say now, of the integration? So in terms of any management retention or any employee retention that you are thinking of, does the headquarters stay the same? If we look at things like the sales channel and the customer channels, in order to get your synergies, you are going to have to put those together. So could you give us just a preliminary sense of how those two companies come together under the Schneider umbrella? Thank you.
Thank you, Ben, for the question. Look, number one, you are absolutely right. We are operating in a highly competitive market, so retention of people is an absolute priority. It is the case for the three companies that we have in the discussion today, which are, of course, PTC, Cognite, and AVEVA. I do not want to elaborate into the detail, but definitely retention of key people is something which is very on the agenda, and we are already working on it. The second point, when you speak about sales channel, organization, and so on and so forth, it is really too early to say.
As I said in the previous question, what I can share today is definitely we will continue to operate in post-closing with one software vehicle, with one leadership. That is very important at the top. As I said, what we want at the end of the day is while we maximize the synergies that you can have in function, in different parts, in engineering, is to make sure that at the end of the day also, we protect the specialization of every single of those business. We have, by the way, at Schneider Electric, a lot of learning.
You know that Schneider Electric in the past 20 years have been through a lot of acquisition. We know when it makes sense to be one Schneider, for instance, in data center, and for some very large customer, and you bring all the capabilities of Schneider. But we know that there are some cases where we need to have highly specialized people to carry on one part of the portfolio. The next step is that you can imagine, and it has started already, is we to imagine what will be the places where we need to be one versus the places where we want to stay highly specialized. But again, insist under one roof, which will be the roof for the one software organization.
Great. Thank you.
Thank you. Thank you, Olivier. Thank you, Ben. Operator, can we take the next one, please?
Yes. The next question is from Gaël de-Bray of Deutsche Bank.
Oh, yes. Good morning, everybody. The transaction will clearly broaden your software and market exposure, particularly in the automotive and aerospace segments, which are fairly new verticals for Schneider. What's the rationale here, and how do you intend to deal with these new customer verticals from a strategic perspective?
Well, look, it's a very good point that you mentioned, and it was in the presentation. Definitely, through the combination of Schneider and of course, AVEVA and tomorrow PTC, we are increasing our scope, our access to market. We have a very simple approach at Schneider Electric, which is always to look at what are the targeted market we want to operate in, but more important, how do we differentiate? For instance, what I can share with you today at Schneider, I just said, for instance, data center, but I could mention about power grid. This is what we are doing today. We build a differentiated strategy, what I mean, a unique value proposition.
That's where, for instance, my colleagues from AVEVA in energy management and installation sit together to develop basically what will help Schneider Electric to differentiate in front of the customer in each of these verticals. The second point, which is very important, is the go to market. For a certain number of strategic accounts, and today there are around 100 for Schneider in those key verticals, we want to make sure we operate as one. We give the possibility to the customer to have one interface that will bring the different capabilities of Schneider.
Now with those new verticals that you mentioned coming from PTC, we have the same approach to say what is the unique value prop that we can bring to those verticals from a technology standpoint, making sure we develop eventually some extra to differentiate anymore, and making sure after that, with Neil and his team, we identify what are the strategic account, the largest one they have in those vertical, and to make sure they can have a very, very favorable treatment, special treatment from Schneider everywhere in the world.
Because of course, we did not speak too much about it today, but it is about the scale, it is about the geographical footprint. It is about how we differentiate technology. Key speaking across the different parts of our portfolio is how we go in front of those targeted accounts in those targeted segments to deliver really the most of Schneider Electric in the different part of the world.
Thank you, Olivier. Thank you, Gaël. With that, operator, can we take the next question, please?
Yes, sir. The next question is from William Mackie of Kepler Cheuvreux.
Yeah, good morning. Thank you for making the time. My question really relates to risks. I wanted to understand, there's a clear debate around integrated hardware and software players competing with pure play software players. This sort of transaction could affect the customer base of PTC. How do you assess the dissynergies from the deal as it goes through and the competitive response that may put pressure on your revenue goals? Perhaps also just with regard to the risk on closing, how is the process being run and to what extent do you think PTC shareholders may require more of an open competition for their company? Thank you.
Thank you very much for the question. I'll take the first part, which is really a very important one. On one side, as I said and repeated several times, we believe there is a very strong merit to be open and interoperable because at the end of the day, you want to give the choice to the customer. That's very important. By the way, I've been in the company for 33 years. I've been talking with customer every single week, and it's very obvious that even our customer, they don't perceive Schneider Electric today like it was five years ago.
They don't perceive Schneider Electric only as a hardware company selling product. They see Schneider Electric more and more as a technology partner with a unique portfolio and being able really to provide different layers, different offer in an agnostic manner. The second point, which is for me very important, our customer increasingly are buying integrated, connected, and AI-enabled solution. AI is really changing the game because our customer are going for higher business goals, higher productivity.
Every single CEO that I meet is looking for higher productivity, higher efficiency, more resiliency, and they are really trying to figure out how you can really, from the shop floor, from the physical world to the digital world, make the most of the technology. In some cases, they like to do their choice and go and buy different. In many cases, they are looking for a strong tech partner that can help them really to build a more integrated system, and that's agility we want to have in the market. AI is forcing somewhere a stronger integration around the data, around the context solution.
Doesn't mean that you need to buy everything from the same company, but the company which will be really able to connect physical and digital faster than the other and bring an AI context solution faster than the other, I do believe will make a very strong difference. This is basically what we are trying to do in our vision and even more today, by bringing PTC on board. Nathan, you want to take the second part of the question?
Yeah, I guess the other part of your question, Will, was more on the closing. I think to start with, at this moment, we're going to be focused mostly on completing the agreed transaction with all the customary deal protections, right? So you'll see that in the merger agreement. From that point of view, we have both the unanimous Board approval from both Boards, right? So we go through the process with this offer of all cash. Furthermore, our policy is not going to speculate on what type of interlopers we could have and hypothetical approaches afterwards, but that's really what we're focused on today.
Thank you.
Thank you, Nathan. Thank you, Olivier. We have still time for a couple of questions, so please, operator, can you open the line for the next one?
Yes, sir. The next question is from Phil Buller of JP Morgan.
Oh, hi. Thank you for the question. I understand the message that this is fully aligned with the framework from the last CMD, but I think most of us came away from that event with the view that the focus for Industrial Automation was almost exclusively about improving the margins. We've now spent, I guess, $27 billion on M&A. I guess my question is, what has changed?
Is the AI disruption risk stepping up materially so you've had to double down to avoid being disrupted? Or with this approach, do you now see Schneider as the disruptor? It feels to me like quite a lot has changed since the last CMD. I know we've also now had a change in CFO in that time frame. I wonder what's changed and when we might expect also another Capital Markets Day, given the emphasis on IA. Thanks.
Thank you very much for the question. Look, I don't think the strategy is related to the change of CFO, but let me clarify probably a very important point here. What we said in the CMD, and by the way, it was before doing the CMD after, which is very important for Schneider, is to look at the end market. We are not looking at our portfolio through the lens of only energy management or Industrial Automation. We are looking at end market. We are looking at our customer. Our job at the end of the day is to solve their problems.
Again, I was saying, when I meet CEO who are telling me, "My goal is to deliver that much productivity resilience in the future," we look at end market, we look at application, and then we see that there is a very strong merit to have capabilities in energy, in energy management, in electrification, in process. For us, Industrial Automation is not a standalone business. It's a business together with the rest of the portfolio that help us to deliver unique value to our customer. I've said during the CMD that what has made Schneider Electric very different across the cycle is our balanced exposure from buildings to data center, industry, and infra.
In all those segments, we need all those capabilities. You take a speed drive, which is qualified as Industrial Automation, is extremely important, for instance, in building and data center. For us, our strategy has been always to consider those different parts of the portfolio as being extremely critical. As you know, Industrial Automation is reported standalone as also to demonstrate a turnaround in profitability, which we have explained together with Nathan.
But the most important part is to make sure that those different pieces, they contribute. The last point, which is very important, the more we are entering in this world that I was trying to describe, where you go from the physical to the application to the data, the more it's important to combine all those unique capabilities for the different segments with product, machine, process, and energy capabilities. So we don't see those activity as standalone activity.
We see them as technology, and our leader in technology have a responsibility to develop the most advanced technology that we combine together to deliver the best solution to our customer. Data center is, for instance, a very good example where we have assembled first a very strong portfolio at the build stage. We moved across the life cycle and we leverage all the capability at share.
To keep really my answer a bit shorter, think about Industrial Automation with the rest of the portfolio as a set of technology that we want to develop to lead every segment, every application, and to bring the most of energy and industrial intelligence for our customer. At the same time, we'll make sure that every single activity, of course, has a strong profile when it comes to the margin standpoint.
Okay.
Maybe, Phil, if I just add one, and it's short, comment to what Olivier has already said. We remain committed on the margin improvement, right? You imply that this isn't. We absolutely remain committed on this one, and we remain disciplined also on our M&A strategy, right? Disciplined approach, opportunistic, has to have strategic fit, has to have the profitability profile, has to fit within Schneider's broader portfolio. Nothing changes versus those commitments from CMD.
That's great. Thanks very much, guys.
Phil, Olivier, thank you. Thank you, Nathan. Operator, we have time for two last questions, so if you can please open the floor for this next one.
Yes. The next question is from James Moore of Rothschild & Co Redburn.
Yes. Thank you. Good morning, everyone. Olivier, Nathan, apologies for my technical issue earlier. I've got two, if I could. One on revenue synergies, the EUR 800 million, 33% of PTC's revenue, a very big percentage. Is there any chance you could pie chart your four areas of cross-sell, channel extension, geographic reach, and digital thread, and also phase the timeline? Is it straight line? To flip those revenue synergies a different lens, how much is basic PTC revenue win versus a Schneider automation revenue win? That's really the first question on revenue synergies. Perhaps I come back on ROCE.
Okay. If we're going to split the two questions that way, I can take this one, Olivier, on synergies. No. James, the way we built the synergies is we've studied this over quite a period of time, Olivier's already mentioned that, and come with a pretty structured approach. It's highly complementary, as you described, with strong industrial logic and created the end-to-end, let's say, physical to digital AI platform that Olivier described. It's on product, right? So that's the data fabric, the design, the control that Olivier mentioned.
It's on industries, and we've already answered some questions on process, discrete hybrid, and it's also on go-to-market, so the customer and partner channels. As you mentioned, I'm not going to dimension exactly, but it is bi-directional, right? So it's cross-sell on both directions. Finally, we see those opportunities coming pretty closely after closing and then delivered linear over the midterm.
So that can kind of give you a little bit of dimension on the timing. From a confidence perspective, right? We have a strong track record of integrating those types of software assets. It's a long-standing relationship already with Schneider and PTC. Remember, we're using PTC technology, so there's some intimacy there already. That's how I would say we're dimensioning the revenue synergies.
And if I could follow up on the ROCE and just your assumptions, and apologies if you said it earlier, but I went off and had to come back on. I think you talked about a 10% revenue growth for PTC. Is that including or before the EUR 800 million synergies? On the margin side of the equation, I note that consensus has margins lifting about 600 basis points over the next four or five years. Are you baking that in and putting EUR 250 million of synergies on top of that? Finally, what WACC are you using, please?
Look, James, now you go to a few other questions. I can go on those ones for sure. No, from a revenue perspective, we build our case, of course, based on. You should build your base based on the consensus of the PTC business. So I think you understand quite well their growth, profitability, and cash profile, which would imply, of course, that we look at revenue synergies as incremental to the business.
That's how we bring the combination, and I've already mentioned the bilateral nature of those. From a margin perspective, I think you can take the same assumptions around the consensus of the standalone businesses and then also the synergies that would come. From a ROCE perspective, we expect the ROCE to be back in the 15%-20% at a Schneider level within one year of the transaction closing. We would expect the transaction ROCE to exceed WACC within five years. So that's how we dimension those elements.
Thank you, Nathan.
Thanks, James. Thanks, Nathan. Operator, we have time for a very last question, so let's go, please.
Okay. The final question is from Max Yates of Morgan Stanley.
Thank you for the question. I wanted to ask about the timing of the equity component. Do you expect to wait until you have regulatory approval to raise the equity, or would you do it sooner rather than later? And I guess in addition to that, I saw on the end-market exposure, there's the mention of kind of federal and defense. Do you expect to have to get CFIUS approval? And do you see any sort of challenges with that given the sort of detail that you've looked at with the end-market exposure? Thank you.
Well, thank you for the question. Yes. I'll take the point on CFIUS. You're right, we have to go through a certain number of regulatory approvals. CFIUS is one of them. We have some experience. You cannot ever preempt the outcome, but we have some experience. We've done it already in the past year, for a couple of company. We are doing it right now, also for Cognite. We don't expect any major issue. We'll follow the process. And again, we have accumulated a certain level of experience that give us the confidence that it should not be a major problem in the process. And let you take the other part of the question, Nathan.
Yeah. Max, just from an equity and debt takeout perspective, we haven't decided exact timing of those yet. But we would intend to de-risk the financing pretty rapidly, as you can imagine. I think it all fits within our established treasury policies and practices to manage the key financial risks. Nothing else to add there, Max.
Okay. Thank you very much.
Thanks, Max, and Olivier. Thanks, Nathan. With that, we are closing the Q&A. As usual, thanks a lot for the attention and the interest that you have in Schneider Electric. Look, we are closing, but obviously the investor relations team of Schneider Electric remains at your disposal in case you have question in the next days. And we are looking forward to talk to you all during the Q3 earning release. That is, as you could see into the press release, anticipated to October 16th. With that, wish you a good day, and talk to you soon. Bye-bye.
Thank you very much.