Today I’m going to indulge in something I rarely do, much to the exasperation of my wife Carol. A goodly number of our conversations begin with her asking me, “What do you suppose…” and end with me saying, “I don’t have a clue.” I’m not sure if this reluctance to speculate is a guy thing or just a facet of my own particular personality, but for once I’m going to go out on a limb and think about, “What if…”

The catalyst for my speculative mood was the recent acquisition of M*Modal by One Equity Partners. In addition to the jaw-dropping size of the deal–$1.1 billion–the fact that a public company is going private instead of the other way around is quite interesting to me. Add to that the speculation on the part of at least one industry analyst that One Equity’s plan may be to re-sell after 18 months, and my mind really starts wondering (or wandering, as the case may be!)

Let me be clear: I have no inside information whatsoever about the M*Modal deal; everything I’m about to say is indeed pure speculation. With that said, I figure the acquisition was mostly about automated speech recognition and natural language processing/understanding technology. Ironically, M*Modal’s only other major competitor in this space, Nuance, has really done M*Modal a huge favor by heightening awareness of the potential for ASR/NLP/NLU across a broad spectrum of applications. Of course there’s no way to know for sure, but I would be shocked if a private equity firm such as One Equity would have ever even thought about paying north of a billion dollars for a relatively unknown company like M*Modal under different circumstances. But with all the publicity Nuance has been getting lately, it seems like everybody and their brother-in-law knows what speech recognition is. During a conference call with analysts after the One Equity deal was announced, M*Modal CEO Vern Davenport was quoted as saying, ”I really feel like we’re coming at this at the right moment.” Truer words were never spoken.

And speaking of Apple and Nuance, while I’m in the speculating mood, how long can it be before Apple (or Microsoft) pulls the trigger on a deal to buy Nuance and be done with it? Especially after the M*Modal buy, I will be genuinely shocked if Nuance is not acquired by Apple before the end of the year. Again, I have no crystal ball, and I don’t pretend to be a M&A guru, but it just seems logical to me. And if that were to happen, and if Microsoft really wants to beat Apple at their own game, at that point Ballmer should be on the phone to One Equity to talk about M*Modal.

So what, you may ask, does any of this have to do with a possible market rearrangement in the medical transcription industry? Quite simply, if in fact the M*Modal acquisition was mostly about technology, and if in fact Nuance was to be acquired for the same reason, I think it’s reasonable to wonder whether or not an outfit like Apple or Microsoft really wants to be in the transcription business. And if not, what would that mean for our industry? It doesn’t seem far-fetched to me that we could see existing M*Modal and Nuance transcription services spun off or sold off in the scenario I’ve described. Of course, that raises the question of who would be looking to buy if One Equity and/or a new hypothetical Nuance owner were interested in selling off their transcription divisions? What would be the implications of a transcription industry where Nuance and M*Modal were NOT the big dogs?

As you might have noticed, I have a lot of questions and speculation but not much else. I could be wildly off target on all of this, and it wouldn’t be the first time. But I can’t help but believe that our industry is headed for an even more tumultuous ride than any of us would have thought a month ago.

Jay Vance, CMT, CHP

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