The medical transcription and speech recognition market just got even more interesting. Following on the heels of Nuance Communications’ acquisition of Transcend Services for $302 million in March at a 2.5x revenue multiple, One Equity Partners (the private equity arm of JPMorgan Chase with $11 billion under management) last week announced plans to acquire M*Modal, Nuance / Transcend’s leading competitor in clinical transcription services and speech recognition solutions. One Equity is paying $1.1 billion for M*Modal, or $14.00 per share, an 8.3% premium over the closing price prior to the deal’s announcement. This valuation represents approximately 2.5x M*Modal’s trailing revenue.
Having recently released its next generation of healthcare speech recognition solutions, M*Modal will be able to advance its leadership position in the transcription industry even faster with One Equity’s sponsorship. In particular, we believe that M*Modal is likely to consider acquiring one or more transcription services vendors, in the same manner that Nuance acquired Transcend. Transcription services vendors enable speech recognition providers with a means to better disseminate their technology solutions and develop closer, continuing client relationships. In addition, One Equity Partners has a history of growing its portfolio companies through acquisitions, and has a demonstrated understanding of the healthcare landscape through its other investments in Wright Medical Group and Apollo Health Street.
Bottom line: One Equity Partners’ acquisition of M*Modal reaffirms Signal Hill’s outlook that consolidation is in the near-term forecast for transcription service vendors.
Posted by Signal Hill 
