Wednesday, July 09, 2014

A Look at Hyland's Latest Bid for ReadSoft

It is presently unclear to me exactly what Hyland's latest bid for the ReadSoft means for the Swedish based document capture and invoice processing specialist. If you remember, in May, Lexmark made a $182M bid to acquire ReadSoft. It's plan was add it to its Perceptive Software business, where it would complement Lexmark's Brainware acquisition from a couple years previous.The ReadSoft board unanimously recommended accepting the offer,  with co-founders Lars AppelstÃ¥l and Jan Andersson abstaining from getting involved (due to conflict of interest as together they own more than 20% of the company's shares).

The board's recommendation seemed to be based on more than just getting the best price. It also took it into account the future of ReadSoft employees.

In mid-June, Hyland stepped in with a higher bid of $198M - which met the requirement of being 7% or higher than the Lexmark bid in order for a new bid to be considered. Almost immediately, Lexmark countered Hyland's initial bid with an incrementally higher bid of $200M, which the ReadSoft board unanimously recommended - once again with Appelstål and Andersson abstaining. With the acceptance/recommendation of Lexmark's new bid, once again the provision was put in place that a new bid would have to be 7% of higher for the board to consider it.

This week, Hyland apparently decided to end run the ReadSoft board with a bid of approximately 4.5% higher (exact prices in US Dollars are a little hard to calculate because they depend on the value of the Swedish Krona, which is the currency bids are being made it, but safe to say that Hyland is now bidding in excess of $200M) than Lexmark's last bid. So, the board officially can't consider the bid, but shareholders can. And in a press release issued by Hyland UK, which is actually making the bid for ReadSoft (probably due to tax purposes, as Hyland is based in Cleveland, Ohio, US), said that since its initial bid, Hyland has acquired approximately 8% of ReadSoft's outstanding shares, bringing its total holdings to 11%. I'm not sure what percentage they need to complete a deal.

At last report, Lexmark had acknowledged the new Hyland bid and weighing its options.

I'm not really sure how this all going to shake out. As we said in our last issue of DIR, it seems that Lexmark and ReadSoft are kind of destined to be together, so we wouldn't be surprised if Lemark upped its bid to top Hyland once again, but as industry analyst Harvey Spencer pointed out in a conversation earlier today: when does it stop?

From a strategic standpoint, acquiring ReadSoft probably makes even more sense for Hyland than it does for Lexmark, so Hyland may be inclined pay an even higher price. Perceptive already has Brainware, which like ReadSoft is strongest in the invoice capture space, so there is clearly some overlap between the two organizations. While Hyland has AnyDoc, ReadSoft would give Hyland a great boost in the mainland (non-British) European market due to its large customer base and sales staff there, as well as its strong presence in SAP environments. Perceptive already greatly strengthened its European presence last year with the acquisition of Saperion and has also been utilizing Lexmark's European presence to advance sales in that region. Not that ReadSoft doesn't make sense for Lexmark on many fronts, it just may be that it makes even more sense for Hyland.

Anyhow, this is all exciting stuff for ReadSoft I'm sure, and also exciting for the capture market, because about a month ago, I was bemoaning the fact that ReadSoft was going for such a low price. Things are definitely looking up, and hopefully ReadSoft will end up a winner with either vendor.

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