Tag: Nuance Communications

‘Nuanced’ talk with Tweddle Connect acquisition

Ben Kolada

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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Healthy M&A activity in medical speech recognition and transcription

Ben Kolada

Contact: Ben Kolada

There’s seemingly been a burst in deal volume in the niche medical-focused speech recognition and transcription market lately. On Thursday, iMedX announced the acquisition of Electronic Medical Transcription Services (eMTS), capping off a growing line of acquisitions in this sector. Driving deal flow, among other things, is healthcare professionals’ increasing use of transcription and voice recognition systems and various legislation being passed that provides incentives for digital clinical documentation.

One such bill is the Health Information Technology for Economic and Clinical Health Act, also known as the HITECH Act, which became law in 2009. HITECH provides incentives for healthcare providers to use electronic health records, which store clinical data in a digital format.

Although the eMTS buy is likely quite small in the grand scheme of things, there is big M&A money being poured into medical speech recognition and transcription deals.

Earlier this month, One Equity Partners bet its money on this market when it announced that it was taking M*Modal private for $840m, or $1.1bn when including $260m of net debt. That transaction was announced almost exactly a year after M*Modal was acquired by rival MedQuist, which assumed the target’s name.

We’ve previously written that Nuance Communications, with its Nuance Healthcare unit, has been a major consolidator in this sector. In March, Nuance announced that it was paying $313m for medical-focused rival Transcend Services – its largest purchase since its last significant medical acquisition in April 2008, when it paid $363m for eScription. Nuance’s Healthcare division generated $583m in trailing sales as of March 31.

Recent select M&A in medical transcription and speech recognition

Date announced Acquirer Target Deal value
July 2, 2012 One Equity Partners M*Modal $840m
March 7, 2012 Nuance Communications Transcend Services $313.5m
August 15, 2011 Nuance Communications Loquendo $75m
July 14, 2011 Nuance Communications Webmedx Not disclosed
July 11, 2011 MedQuist M*Modal $130m

Source: The 451 M&A KnowledgeBase

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Nuance consolidates with Transcend acquisition

Ben Kolada

Contact: Ben Kolada, Thejeswi Venkatesh

Following a record dealmaking year for the speech recognition software vendor, Nuance Communications today announced the $313m acquisition of medical-focused rival Transcend Services. The deal is Nuance’s largest purchase since its last significant medical acquisition in April 2008, when it paid $363m for eScription. Nuance had earlier acquired Transcend competitor Webmedx for an undisclosed amount in July 2011. Each of these transactions bolsters Nuance’s healthcare division.

Nuance is handing over $29.50 per share in cash for Transcend, valuing the target’s equity at $313m (Transcend had no debt and about $13m in cash at the end of 2011, so the enterprise value is slightly lower at $300m). The per-share offer is a 40% premium to Transcend’s closing share price the day before the deal was announced and, with the exception of a brief uptick in July 2011, the highest price Transcend’s shares have seen since 1996. However, the valuation for the company is lower than a precedent transaction. Using enterprise value, Nuance is valuing Transcend at only 2.4x trailing sales. Meanwhile, its pickup of eScription, a SaaS provider of voice recognition and transcription services, was valued at a loftier 8.1x trailing sales. Some explanation for the discrepancy is the premium given to SaaS companies and difference in margins. EScription had an equally lofty operating margin of 39% compared with Transcend’s 16%. Further, Transcend’s SaaS platform was relatively nascent, having hit the market just last summer.

The Transcend buy follows a record year of dealmaking that saw Nuance announce eight transactions worth nearly $400m. But the buying spree may not be over, given the continuing consolidation in the transcription and voice recognition sector. Even MedQuist, a relatively infrequent acquirer and Transcend’s chief competitor, bought three companies in the past two years, including M*Modal for $130m in July 2011.