In its third acquisition in less than two years, Kofax (NASDAQ: KFX; LSE: KFX) announced on September 2 that it had purchased Softpro GmbH, a provider of eSignature verification software, for $34.7 million. The deal—for all of Softpro’s outstanding stock—was also Kofax’s third-biggest acquisition of the last five years. Only Singularity Limited in 2011 and Kapow in 2013 netted larger purchase prices.
Softpro, a German company, ended its fiscal 2013 with revenues of $13.3 million and gross assets of $6.1 million, according to the Kofax press release announcing the sale. Fifty percent of Softpro’s 2013 revenues came from maintenance services, while 38% were from sales of software licenses. Professional services netted 3% of 2013 revenues and hardware sales accounted the remaining 9%.
Kofax has a history of purchasing companies in complementary industries or geographies to both expand its product lines and its overall customer base. With more than 20,000 customers around the world, including in the banking industry—where Softpro shows significant strength—the addition of the German company to Kofax’s portfolio offers high cross-sell potential for existing Kofax customers to latch onto a new product.
Softpro’s Product Lines
Softpro is focused exclusively on providing software and services around eSignature verification. Electronic signatures are big business, and not just when it comes to sales contracts. Consider that the vast majority of payments are still made via check—in fact, 58% of B2B payments still come through on paper, according to recent Ardent Partners research (“ePayments Rising: The 2014 Market Report”).
Softpro’s flagship software is FraudOne®, a signature verification and fraud prevention toolkit that’s in use at 12 of the world’s 25 largest banks and protects deposit accounts in more than 25 million transactions every day. This puts Softpro at the vanguard of preventing payment fraud in B2B and consumer transactions for that most fraud-vulnerable of payment methods: the paper check.
According to Softpro’s own numbers, they’ve also reduced the incidence of false positives (misidentification of possible fraud) from 2,000:1 down to 90:1 with their fraud-detection software. The German company also notes its ability to cut losses due to fraud by 60% on average and cut fraud analyst workload by up to 40%.
Softpro also offers SignDoc®, an eSignature solution that offers click-to-sign and physical signature capture via mobile devices, as well as signature verification and fraud detection. This second software offering processes 200 million eSignatures annually, placing Softpro in a significant position of strength.
Alignment with Kofax’s Existing Business
Kofax has for many years offered strong scan-and-capture solutions, including mobile capability, to the banking and financial services industries, among others. Since 2011, they’ve expanded into business process management with the acquisition of Singularity Limited, software development kits with the Atalasoft buy also in 2011, business intelligence and analytics in 2013 with the purchase of Altosoft, and data integration that same year with the purchase of Kapow.
Softpro’s eSignature products nicely complement the core Kofax scan-and-capture functionality. Once integrated, a company can not only convert paper invoices to digital ones with Kofax scan-and-capture tools, they can also make use of Softpro’s signature verification for an added layer of security in electronic workflows.
Speaking about the Softpro acquisition, Reynolds C. Bish, Chief Executive Officer of Kofax, said in a statement, “Softpro has established itself as a trusted solution provider with many of the world’s largest banks—including Citibank, JP Morgan Chase, Wells Fargo and others—as well as leading financial institutions, retailers and government agencies in more than 50 countries. Its software offers enhanced capabilities to Kofax customers who want to embed it within their smart process applications, thus making the First Mile of customer interactions even smarter.”
According to Bish, Kofax plans to integrate the Softpro functionality into its Total Agility 7® solution so customers can experience a fully digital and secure experience in their accounts payable workflows. This acquisition places Kofax ahead of many other companies in the scan-and-capture space, and it’s clear the Irvine, Calif.-based company intends to continue its long-term strategy of acquiring companies with complementary product lines and in adjacent industries. Kofax is already a leader in the ePayables market—who’s to say where they will go after this?
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