Lexmark International (NYSE:LXK) is set to acquire Saperion, a Germany-based enterprise content management (ECM) and business process management (BPM) software provider that focuses on document archiving and workflow solutions, for $72 million. Saperion will be integrated with Perceptive Software, and this will give Lexmark a foothold in the fast growing content and process management market in Europe. In this article, we will explore the importance of Perceptive software division and why this acquisition is strategically important for Lexmark.
Perceptive is Key To Revenue Growth
- How Have Lexmark’s Managed Printer Service (MPS) Revenues Grown In The Last Two Years?
- How Big Can Lexmark’s Perceptive Business Become By 2020?
- How Has Lexmark’s Laser Printer Price Declined In The Last Five Years?
- How Have Lexmark’s Software Division Revenues And EBITDA Grown Since The Acquisition Of Perceptive In 2010?
- By What Percentage Did Lexmark’s Revenues And EBITDA Decrease In The Last Five Years?
- What’s Lexmark’s Fundamental Value Based On Expected 2015 Results?
The Perceptive software division is the second biggest business unit and makes up nearly 9% of Lexmark’s estimated value. As Lexmark plans to become an end-to-end solution provider, Perceptive Software is becoming an increasingly important division for Lexmark and is helping the company manage the downturn in the printer and peripherals market. Perceptive experienced annual growth of 62% in the ECM and BPM business in 2012 and reported $162 million in revenues for FY12. Lexmark has guided 15% growth in Perceptive’s revenue for FY13. Lexmark continues to build its product portfolio through inorganic growth.
Prior to the Saperion acquisition, the company completed five acquisitions (Brainware, ISYS, Nolij, Acuo and Twistage) that will be integrated into Perceptive Software and will help drive the company’s software business. We also expect the seamless integration of Perceptive’s array of solution with MPS to bolster revenue for the company. Currently, we expect Preceptive’s revenues to grow from $156 million in 2012 to over $470 million by the end of our forecast period. However, the revenues from this division can be significantly higher in the future due to organic and inorganic growth.
Saperion To Strengthen Lexmark’s Presence In Europe
According to Lexmark, the addressable market for both ECM and BMP is fairly large and offers good growth rates. It expects that the content and process management software will account for about 30% of its revenue by 2014. Lexmark estimates that the worldwide spend for content and process management in 2012 exceeded $10 billion. The content and process management is expected to grow at 10% per annum in the near foreseeable future. 
According to Gartner, EMEA is the second largest content and process management software market in the world, with $7.1 billion of software revenue in 2012. Saperion is a leading provider of ECM and BPM solutions. Currently, Gartner ranks it third among niche players in Gartner’s Magic Quadrant for ECM. The acquisition of Saperion accelerates several strategic Lexmark objectives, including rapidly expanding its software and solutions footprint in EMEA. Additionally, this acquisition also supplements Perceptive product portfolio with enterprise resource planning (ERP) software, email and document management systems. It has a strong clientele of over 2,000 clients in Europe, which includes well known brands such as Siemens and Daimler, and Lexmark can now deliver solutions to these enterprise customers. Additionally, Saperion can now use Lexmark’s global reach to offer and support its solutions in regions where it previously was not represented.
The deal, subject to regulatory approval in Germany, is expected to close in the third quarter.
We currently have a $38 Trefis price estimate for Lexmark, which is in line with its current market price.Notes: