Tuesday, March 24, 2015

Lexmark Attempting To Corner the Market on Capture

Wow. That really caught me by surprise. About 4:30 today it was announced that Lexmark was acquiring Kofax for $1B net of cash. I was just finishing up my Kofax Transform conference story and about to start writing my piece about how Xerox was going to integrate the Kofax technology into its organization. It really made a compelling story. And the rumor circulating around AIIM last week, was the the Xerox-Kofax deal was going to close any day...Then I heard something about Kofax asking for too much, and the next thing I know Lexmark announced it had made a bid of $11 per share, or about a 47% premium over what the Kofax stock was trading at today. It's also more than 3x Kofax's 2014 reported non-GAAP reported revenue of $297M -so from that perspective it's not a bad deal.

There is a lot to like about this deal from Perceptive's standpoint. It's latest and most aggressive move in an already aggressive ECM software strategy. That said, there is certainly some overlap with the recent ReadSoft acquisition, as well as its previous Brainware acquisition. But, if you are going to transition from a hardware to a software vendor, you might as well go hard.

I wouldn't be surprised to see Xerox make a counter offer, but if $1B was already too rich for their blood. But still, if I was Xerox, I would be looking to find some money somewhere, because they really were planning on investing a lot in this partnership and now Kofax is in danger of being taken off the market by a competitor. Exciting times.

12 comments:

Anonymous said...

I happen to be on the front lines of the Xerox competitive RFP throng some number of months ago when they were seeking a partner to 'put some skin in the game'. That’s code for “We want to partner with you, we want a bunch of free dev resources for integration purposes and BTW, we are not going to pay anything for your software up front”. The deal ultimately went to a desperate Kofax which was completely unsurprising under these circumstances. If Xerox couldn’t even toss 200k into a pre-pay then what makes anyone think they will ante up more than a billion to beat Lexmark? Does Xerox even have a billion dollars? I hear Rochester is still cold this time of year…

DIReditor said...

Hmmm...that is some interesting insight and would certainly jive with the way things played out. If that is the case (and I'm reading it correctly), Kofax was likely playin' possum with Xerox and just using the relationship to push forward a sale with Lexmark - which, as I speculated in last week's DIR, it was important to announce before the end of the calendar Q1.

Anonymous said...

The only independent player left in the space is TIS. Any thoughts on Top Image being acquired in the near future? Lee

DIReditor said...

Other ISVs like Ephesoft, ABBYY,Parascript, and Digitech are also positioning themselves as viable indy players that are competitive with Kofax. There are still choices out there. I don't see TIS being acquired anytime in the next two years. I don't think they would be able to get the valuation they want until their U.S. investments start to pay off.

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