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