Andersson Spearheads ReadSoft Acquition Strategy

Since ReadSoft co-founder Jan Andersson stepped down as CEO in 2011 and joined its board of directors, one of his charters has been to guide the Swedish-based capture ISV's acquisition strategy.  Last year, we saw that strategy manifest itself in the acquisition of foxray, a German high-volume document capture specialist. Last week I was in New Orleans for a briefing on how ReadSoft is integrating the foxray capture framework into its business strategy.

foxray is a capture platform that kind of reminds me of a newer version of the InputAccel platform. It's designed to manage multiple capture workflows and can utilize best of breed components. Historically, it's integrated a lot of Kofax technology for example, but now that foxray is owned by ReadSoft, ReadSoft's capture platform will certainly be the first, but not only, option. foxray's Xbound platform also has cool features like the ability to re-use components across multiple workflows (which eases set-up) and the option to use a single verifier for multiple data capture processes. It also provides an end-to-end view of all a user's multi-channel capture processes.

foxray's Xbound system has historically been sold primarily in Germany, but ReadSoft has plans to bring it to North America targeting markets like service bureaus, healthcare, and financial services.

Last week, ReadSoft announced another acquisition that Andersson helped put together. That was of e-invoicing network provider Expert Systems. Based in Sweden, Expert Systems' hosted application is complementary to ReadSoft's thriving software business in extracting invoice information from paper. ReadSoft recently launched a new cloud version of its invoice capture software as well.

According to Bob Fresneda, president of ReadSoft North America, Expert Systems was doing between $1.5 million and $2 million in annual sales -all of which is counted as recurring revenue due to its subscription-based model. ReadSoft paid $6 million for the business.

Is ICR Technology Underutilized?

Don Dew of advanced document recognition ISV Parascript recently authored an article on the benefits of intelligent character recognition (IDR) technology that he has asked us to share with you. It discusses how ICR technology is underutilized on documents that include handprint and even cursive writing.

Here's an excerpt from Dew's article, "From name, address, social security number, phone number, or any other unconstrained or cursive information entered on a form, advanced ICR solutions can capture this data with a high degree of accuracy and make it available for use within the organization. Based on research performed by AIIM and Parascript last year, only 6% of organizations are automating this level of recognition. At the same time, survey participants estimated that they would achieve a considerable level of productivity savings if they were able to automate the recognition of hand-written text."

Here's the link to Dew's complete article on our DIR Web site.

Just for some background, Parascript develops advanced recognition technology that does both OCR and ICR. Historically, it has been best known for its cursive recognition, which is utilized by the USPS in their envelope and parcel sorting operations. Parascript also offers a document recognition-centric toolkit that includes both OCR and ICR. Parascript recently released a new version of this SDK, as well as a new version of its FormXtra Capture application, which it is moving through a recently revamped reseller program.

Harvey Spencer Associates Launches Voice Recognition Study Related to Dodd-Frank

Related to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (commonly referred to as Dodd-Frank), Harvey Spencer Associates (HSA) has announced the launch of a new multi-client study to identify opportunities for the use of voice recognition technologies to reduce the costs associated with compliance discovery of trading records in the banking and financial services industries. Basically, Dodd-Frank requires that traders in stocks and bonds record all communication related to their business of trading. And those records have to be made available for audits for a year, and delivered fairly quickly when asked for. Deadline for complying with this is Dec. 31. Thus, the current opportunity for implementing voice recognition software.

Spencer is known to most of us for his work in the document capture software market. Here's how he describes his expansion into voice recognition (a move which capture software ISV Nuance actually made several years ago): "It is part of expanding HSA to defining capture as ‘capturing transactional information from unstructured big data elements,'" Spencer stated in an e-mail to DIR. "Defining the inputs as documents; voice; photographs; and video, the intent is to build expertise in these different underpinning technologies which all use pattern based understanding combined with business rules (it’s really forms processing with different inputs) to extract meaningful data.

:In the case of the Dodd-Frank compliance issues, it is a matter of being able to add enough metadata to the trader’s voice recordings in order to reduce the time spent on searching and discovery.  As with forms processing in the past, we do not expect that technology can deliver 100%, there will always be manual effort – what we want to do is identify the value of partial recognition/understanding and the supplements to voice recognition that can achieve this."

Kodak's New Deal

Well, forget everything you read about Brother buying Kodak DI. Not going to happen. Kodak got a better deal from the U.K. Kodak Pension Plan (KPP). How much better? Well, in addition to receiving $650 million in cash and non-cash considerations (for both DI and Kodak Personalized Imaging (PI), which was also up for sale under Kodak's bankruptcy proceedings), the deal also settles $2.8 billion in claims that KPP had against Kodak Corporate.

Granted, claims in a bankruptcy case are not typically worth 100% of face value (or even close to 100%), but still, technically, Kodak Corporate came out $3.45 billion on the books ahead for divesting itself of DI (for which Brother had bid a net $277 million) and PI, which I'm estimating is a little more than twice as big as DI. (In 2012, combined, the two units generated a reported $1.46 billion in revenue, with DI somewhere around $400 million.) I'm guessing that in separate auctions, which is what was supposed to happen prior to the KPP deal, Kodak corporate would have been lucky to get $1 billion combined. So this is a big win.

On top of things, apparently one of the requirements of Kodak corporate's emerging from bankruptcy was that it settle with KPP, which was listed as Kodak's largest unsecured creditor. So, this announced sale takes care of multiple requirements. It also gives DI and PI and solid landing spot.

Dolores Kruchten, president of DI, said to think of KPP as a "financial buyer." "KPP operates independently of Kodak and has more than 1 billion British pounds of assets under its control," she said during a conference call this afternoon. "They have the capability to make investments and actively support our DI business."

Basically, it sounds like KPP plans to continue to operate DI and PI as a business. Said Steven Ross, chairman of KPP, as quoted in a press release, "The businesses that we are acquiring will deliver long-term cash flows to support the plan’s obligations. The financial stability that KPP will provide for the Personalized Imaging and Document Imaging businesses will be beneficial to those businesses’ employees, customers and partners.”


Kodak still has to submit its plan to sell DI and PI to the bankruptcy court for approval, but Kruchten said she does not anticipate any problems with closing the deal. Brother is stepping aside, and Kruchten did not have any insight into what it was being compensated for serving as the "stalking horse" in an auction that will never happen. Kruchten said that Kodak was obligated by law to announce the Brother deal, even while continuing to work on a deal with KPP.


"Brother understood that if we reached a deal like this, where we were able to bundle DI and PI together, its stalking horse bid would be terminated," said Kruchten. "The deal with KPP was not finalized when we reached an agreement with Brother. As you know, no deal is final until ink is on paper. When we made the agreement with Brother that was the only signed deal we had. You know what they say about a bird in hand."

Perceptive Capture Selected for Invoices by Kohler

Quote from the press release:

"We tested a number of available automation solutions, and Perceptive Software’s platform was able to extract more than eighty percent of field data from Chinese and Thai invoices sight unseen, far better than any of the others,” said Ming Zhang, Sr. Systems Analyst, IT Asia-Pacific Corporate Services for Kohler Co."


Being used for invoices that solution is powered by Brainware software, which Lexmark/Perceptive acquired last year. " The technology will be implemented within Kohler Co.’s SAP enterprise resource planning system over the course of a three-stage rollout to include shared services operations in the Asia-Pacific, North America and EMEA markets."

Kohler is a global leader in the manufacturing of kitchen and bath products, engines and power generation systems, tile and home interiors, and an international host at its award-winning hospitality and world-class golf destinations. For more information on Kohler Co. and its products, please visit www.kohler.com.

A Little More Commentary on Brother's Bid for Kodak

A lot of media outlets are reporting that Kodak Document Imaging has been sold to Brother for $210 million. I'm not certain whether or not this is actually the case. As I stated in yesterday's post, the Brother bid is actually a "stalking horse" bid, which is bankruptcy proceedings is technically the low bid in an auction that will take place following the acceptance of a stalking horse bid. The question that I cannot seem to find an answer to is what percentage of stalking horse bidders end up being the final buyer.

This piece does a nice job in explaining some of the "The Pros and Cons of Being A Stalking Horse Bidder for Assets In Bankruptcy." It explains that the stalking horse bidder has an advantage because it basically gets to sets the terms of the sale - what will be included and what will not - and once those terms are set, it's pretty hard to change them apparently. So, anyone else bidding is basically bidding on what Brother has carved out of Kodak as representing DI.

Somewhat related to that, here's what said George Conboy, president of Brighton Securities, had to say about the Brother bid. (I'm quoting from this Rochesterhomepage.com article.) "The price is a little bit light but what we can't be certain Kodak said it would be selling a certain portion of that business, probably majority but can't be sure what they are obtaining as of now."

One question, of course, is is Brother buying the Kodak brand for the DI products and services going forward?

If someone should outbid Brother, as the stalking horse it would likely be owed some sort of compensation, maybe something equal to a small percentage of the deal. I hope to have more later today - after an interview with Kodak executives.

Brother Puts Up Stalking Horse Bid for Kodak DI

Brother Industries has posted the initial "stalking horse" bid in the auction for Kodak Document Imaging. The way I understand it is that the $210 million offer will serve as the minimum bid in an auction that will take place throughout May and close in June. According to the press release on the bid, "Kodak will seek U.S. Bankruptcy Court approval of the bidding procedures at a hearing in late April and is targeting final court approval of a transaction in June."

When Kodak announced it was selling Document Imaging last August, it was advertised as a $400 million profitable business coming off a record year. There is not doubt that the uncertainty surrounding Kodak corporate's bankruptcy has negatively impacted Kodak DI's sales, but $210 million still seems like somewhat of a bargain. That said, the deal also includes  Brothers' accepting $67 million in owed service contracts - presumably stuff that can continued to be renewed, so it shouldn't have negative impact on the bottom line.

Brother would be classified as a strategic buyer as it was recently moved into the document scanner market with the release of some mobile and desktop workgroup models.When I last talked with Brother executives, they said they indicated the vendor had plans to keep moving upstream and an acquisition of Kodak would certainly be one way to do that.

Rumor has it that several venture capital/investment firms were also looking at Kodak, so perhaps there will be a higher bid between now and June. But, remember the prediction I made back in January, "Kodak DI will be acquired by a major printer vendor." The ball is in play.