It took Reynolds Bish six years to catch his biggest fish.
That patience paid off two weeks ago when the chief executive of business software maker Kofax Inc. reeled in the largest deal in the company’s 33-year history, spending $400 million to acquire the document imaging division of Nuance Communications Inc. (Nasdaq: NUAN).
“We were finally able to bring this to a successful conclusion,” he told the Business Journal.
The deal positions Irvine-based Kofax to become a leader in the original equipment manufacturing channel known as multifunction printer, which is an office printer that combines other functions such as scanning, copying or faxing. Nuance’s imaging unit provides software and advice to help companies maintain and automate control of these document processes. Companies often need such control to maintain compliance with information security policies and regulations.
Kofax will acquire a division with more than $200 million in annual sales and 20,000 customers.
“It’s very synergistic with our business, little or no product overlap and extends our market position,” Bish said.
Kofax gets a “solidly profitable” business with more than 700 employees worldwide, and key reseller partnerships, he added.
The company also picks up applications that should bolster two of its fastest growing business lines: automated onboarding and accounts payable.
The deal, projected to close by March, should also catapult Kofax ahead of Canadian software maker OpenText Corp. (Nasdaq: OTEX) as the overall market leader in image capture, Bish said.
1985 Tech Company
Established in 1985, Kofax built a brand with scanning software to streamline information flow, eliminate paper, reduce costs and improve customer service. The company has grown to employ 1,500 globally, including 325 in Orange County.
Since 2012, Bish had on-again, off-again discussions with counterparts at Nuance. Some of those talks centered on the Burlington, Mass.-based company acquiring Kofax outright, while others zeroed in on Nuance selling its document imaging business.
“For a variety of reasons, neither ever occurred,” Bish said.
One reason was that Nuance’s longtime chief executive, Paul Ricci, announced in 2016 that he would retire and initiated a search for a successor. The search ended when Mark Benjamin took over in April.
In July, investment bankers at Bank of America and Merrill Lynch contacted Bish, informing him that Benjamin intended to focus on voice recognition and other technologies and wanted to divest the document- capture business.
$600M Company
Nuance’s imaging business reported $217 million in revenue last year, down 10% from 2016, according to an annual filing. The unit accounted for about 11% of the company’s $1.9 billion in revenue last year.
Its subscription software is sold directly and through a global reseller network. Customers and partners include Xerox, HP, Canon and Samsung.
Kofax posted revenue of $363 million last year, good enough to rank it 54th on the Business Journal’s annual tally of OC’s largest private companies.
It grew the top line 28% from 2016, fueled by growth in its “robotic process automation” business, also known as RPA. The software mimics human actions to complete manual repetitive tasks, like surfing web pages or updating spreadsheets.
Its RPA business, which now accounts for about 13% of total revenue, attracted contracts worth more than $25 million in the fourth quarter of 2017, including the company’s most valued deal yet in the segment. The unnamed customers in that deal included a top 10 global bank and a reseller.
Its core RPA products, Kofax Kapow and Kofax TotalAgility, have been certified by more than 165 resellers in its global channel partner program to meet demand, particularly in the financial services and logistics sectors as the former shrinks branch counts and the latter seeks to streamline business operations.
The moves led to a 50% sales jump in the reseller program over two years, according to the company, which has struck other alliances with big consultants and systems integrators, such as Deloitte and Infosys Ltd.
The combined company will have annual revenue nearing $600 million, which should place it among the 35 biggest private companies by sales based in Orange County.
And the top line has room to grow, as Kofax and Nuance have about 20,000 customers each.
“There’s certainly going to be some overlap, but I suspect at the end of the day, it increases our overall install base of customers,” Bish said. “It provides us with the opportunity to go in and cross-sell and up-sell additional Kofax products into those new customers we’re inheriting.”
