M&A Alert - December 30, 2009
Nuance Agrees to Acquire SpinVox
Transaction Overview
On December 30, 2009, Nuance Communications (NASDAQ: NUAN) announced that it has agreed to purchase Spinvox for $102mm in cash and stock.
Target Description
Spinvox provides a service that converts voice messages into text then delivers the text message as an email or SMS text message. Spinvox primarily sells its service to wireless carriers who then offer the service to their customers. Spinvox has customer relationships with Skype, Vodafone, Bell Mobility, Rogers Wireless, O2, and Virgin Mobile . Competitors include YouMail, Google Voice, Simulscribe, Nuance, and GotVoice. Spinvox raised a total of over $200mm from a variety of investors including Goldman Sachs, Allen & Co., GLG Partners, Blue Mountain Capital Management, ABN Amro Capital Partners, Gartmore Investment, and Toscafund Asset Management. Founded in 2003, Spinvox is headquartered in Marlow, U.K.
Buyer Description
Nuance Communications is a speech and visual imaging software company. Nuance’s server and embedded speech technology drives a suite of software products for telephone call steering, automated telephone directories, medical transcription software, and optical recognition tools. John Pollard, Vice President of Voice-to-Text Services, was the executive sponsor of the transaction. Founded in 1992, Nuance is headquartered in Burlington, MA.
Nuance purchased Spinvox for $102.5mm, of which $66mm will be in cash and $36.5mm in Nuance common stock. Spinvox represents Nuance’s fifth acquisition this year after eCopy (a document imaging solution provider), Jott (a voice to text translation service provider), XSolutions (an office software vendor) and ZiCorp (a mobile search, input and advertising technology provider).
Strategic Rationale
Consistent with its extremely aggressive past M&A effort, Nuance is acquiring Spinvox to consolidate their competitive position within the speech-to-text market. Spinvox brings solid carrier relationships, particularly within Europe, capability in multiple languages and intellectual property and patents.
Architect Partners’ Observations
Spinvox has experience a wide array of challenges recently including questions relating to how much human intervention is required to transcribe messages and very material cash flow challenges. Clearly under significant pressure, an M&A exit was desperately needed but with the predictable disappointing outcome for investors. Speech-to-text promises to see strong growth over the next several years as the value proposition is strong from an end users perspective. One big question, however, will be the economics of the business with Google’s imminent entry via Google Voice, which will likely offer voice-to-text as a free service.