‘Nuanced’ talk with Tweddle Connect acquisition

Contact: Ben Kolada

Speech recognition vendor Nuance Communications is no stranger to M&A, having announced 13 deals worth more than $1bn in just the past two years. However, while the company eventually provides some details on most of its transactions, it rarely gives as granular of information as it did in today’s $80m acquisition of Tweddle Connect from Tweddle Group. The need to satiate an activist shareholder may explain the company’s unusual information disclosure.

Nuance often discloses deal values for its acquisitions, more often in SEC filings than in press releases, but it rarely holds conference calls to explain its M&A decisions, much less one that concerns an asset purchase. The company broke the practice in its reach for Tweddle Connect.

Nuance not only provided detailed financial numbers in the press release – the acquired assets are expected to generate $25m in revenue and $13m in cash flow from operations in fiscal 2014 – but also held a conference call to further explain its move. Neither the acquisitions of JATA or QuadraMed’s Quantim division, worth $265m and $230m, respectively, received this level of attention.

Disclosures continued on the call. Before admitting that Nuance doesn’t usually provide this level of granularity, CFO Tom Beaudoin disclosed that Nuance’s automobile group, which Tweddle will fit into, grew 30% on a CAGR over the past four years, and is expected to generate $130m in sales in fiscal 2013.

One possible explanation for the new level of candor and transparency at Nuance could be the rising role of activist investor Carl Icahn. Last month, an SEC filing showed Icahn increased his stake in the company from about 9.3% to 10.7%.

The gadfly investor has used a company’s M&A track record as part of his stirrings in the past. For now, Icahn hasn’t publicly indicated what steps – if any – he’ll push for at Nuance. But as tech companies including Motorola, Lawson Software, BEA Systems, Mentor Graphics and others can attest, Icahn doesn’t necessarily stay silent for long.

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