Kofax Completes Acquisition of 170 Systems

Kofax, a provider of document driven business process automation solutions, announced it has acquired 170 Systems, Inc., a provider of financial process automation software, for consideration of $32.9 million, net of cash held by the company.

170 Systems is privately held, venture capital funded company headquartered in Boston, MA and has approximately 140 employees. The company's flagship product, the 170 MarkView Financial Suite, is a workflow solution for invoice processing and related accounts payable (A/P) functions that is fully integrated and certified for use with both SAP's and Oracle's enterprise resource planning (ERP) software and typically delivers a return on investment (ROI) of less than one year. This is complemented by 170 MarkView Advisor, a real time financial process performance management and cash flow optimization software, and SupplierExpress, a hosted software application that streamlines supplier interaction and enables timely, accurate payments. The company's customers include Bank of Montreal, BT, ConAgra, France Telecom, Juniper Networks, Reader's Digest, Sandia National Laboratories, Select Medical, Thomson Reuters, University of Pennsylvania, Verizon Wireless and over 150 other companies.

"This acquisition is in line with our strategy of augmenting our organic growth with the acquisition of synergistic technologies or complementary companies that increase our competitive advantage or expand our market reach," said Reynolds C. Bish, CEO of Kofax. "In this specific case it addresses a significant competitive disadvantage we've publicly acknowledged and discussed in some detail over the past year, and should therefore allow us to better pursue our revenue growth strategies."

170 Systems' audited financial statements for the year ended December 31, 2008 reported revenues of $28.1 million, a net loss from operations of $2.6 million and gross assets of $20.9 million. During the latter part of 2008 the company restructured its operations with the goal of approximately breaking even on the same level of revenues during 2009 and, on an unaudited basis and excluding expenses relating to this transaction, the company achieved that objective during the first six months of 2009. Kofax expects to effect additional cost savings made possible by its acquisition of the company between now and December 31.

To acquire 170 Systems, Kofax reported it paid total consideration of $43.0 million or net consideration of $32.9 million after deducting $10.1 million of cash held by the company. Of the total consideration $29.7 million was in cash, $9.0 million was in the form of a note payable due on September 4, 2010, bearing interest at the rate of five percent per annum and guaranteed by Kofax's bank and $4.3 million in the form of a hold back, with $2.3 million to be released on September 4, 2010 and the remainder on September 4, 2011, subject to certain indemnification terms and conditions.

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