Lexmark International announced Friday that it will acquire a Kansas company that specializes in helping companies manage information.
The $280 million purchase of Perceptive Software gives Lexmark a broader range of services to sell in addition to its printers and services business, in which it manages printing for companies.
Perceptive Software does what is called “enterprise content management.” As Lexmark business software executive Glenn Hudson explained, think of a process like travel expense accounts.
Lexmark, he said, has always done work like providing the products that scan in receipts and send them to the first stage in the approval process. Programs from companies like Perceptive manage everywhere those receipts go, creating a workflow among supervisors for that information and also perhaps providing guidelines on whether certain expenses are appropriate.
“Perceptive provides a strong core of software development, software sales and software management resources,” CEO Paul Curlander told analysts in announcing the deal. “This strong core resource provides a platform for continuing to grow and expand the software business.”
Lexmark will pay cash for the company, which will operate as a standalone software business within the Lexmark structure and retain its offices in Kansas. The transaction is expected to close in the second quarter.
Tom Carpenter, vice president and senior equity analyst at Hilliard Lyons in Louisville, said the purchase will help steady Lexmark’s revenues.
“This will minimize the ups and downs that come with hardware revenue,” he said, noting that Lexmark is following in the footsteps of IBM, from which it was spun off, by seeking out more business service revenue.
Carpenter said the advantage for Lexmark will be in Western Europe, where Perceptive doesn’t have a strong foothold but Lexmark does. According to Lexmark, more than 90 percent of Perceptive’s fiscal year 2009 revenue of $84 million was in the United States.
Perceptive also has strong ties in certain industries, including higher education and government, that Lexmark already targets with some of its products.
“We saw them with an industry focus, which is really core to Lexmark,” said Lexmark’s Hudson, vice president and general manager of business software and solutions. “We saw a lot of innovation and differentiation in their technology.”
The deal is a rarity for Lexmark, which generally stays away from the merger and acquisition game. Curlander said on the call that the company has typically only done small purchases, such as buying distributors and intellectual property.
Carpenter said the advantage to purchasing Perceptive rather than attempting to create a product that rivaled its offering is the proven nature of Perceptive’s products.
And as Jones put it, “it puts us into ... a high-growth software market and gives us some diversity where we can grow outside the growth we’re experiencing in the (printer) space.”
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