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Nuance & Transcend: M&A That Makes Sense (TRCR, NUAN)

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By Jon C. Ogg Published
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Transcend Services, Inc. (NASDAQ: TRCR) is surging higher on news that Nuance Communications, Inc. (NASDAQ: NUAN) is paying a premium to acquire the company.  While many deals are a waste, this one looks to make sense on the surface.

FBR Capital noted that the speech recognition software maker’s $300 million acquisition of Transcend is a strategic fit.  Transcend has a healthcare focus and it has a reputation that is high quality in small and mid-sized healthcare players.  Transcend’s CEO recently forecast double-digit growth in its healthcare segment recently.

After pulling the Thomson Reuters estimates, the $300 million price tag is only about two-times expected revenues for 2013 ($162.4 million consensus).

What may be even more important than all is that this is a bolt-on deal for Nuance and it helps to justify its $8 billion market value and premium valuations of more than 4-times expected 2013 revenues.  Nuance is expected to have almost 20% sales growth in 2012 and over 14% in 2013 before the effects of this deal.

JON C. OGG

Photo of Jon C. Ogg
About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. a673b.bigscoots-temp.com.

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