SourceHOV and Novitex – Perfect together? Remains to be seen

On February 21st of this year, affiliates of Apollo Global Management LLC and Handson Global Management (HGM) agreed to combine Novitex and SourceHOV with Quinpario, a publicly traded special purpose acquisition company, to form Exela Technologies, creating an industry-solutions provider for financial technology and business services, delivering mission critical, technology-enabled multichannel information services.  The transaction is valued at $2.8 billion.  Click here to read the Novitex press release.

Some facts about the merger:

  • SourceHOV’s revenue is $900 million, Novitex’s revenue is $600 million
  • New company will be named Exela Technologies
  • Apollo (owner of Novitex) will have 2 seats on 8 person board
  • Projected $37.5 million in expense reductions in 1st 90 days – projected $23.7 million in labor cuts

The key questions are: how does this merger benefit the legal vertical sector of Novitex’s business and what should you do now?

1.       How does this merger benefit Novitex’s legal vertical?

Based upon the information provided so far by Novitex, not much.  SourceHOV does have a significant number of “delivery centers” which may benefit Novitex’s corporate clients but in reality, we do not see, and have not been told, of any direct benefits to Novitex’s legal clients.

2.       What should you do now if you are a Novitex client?

Based upon a number of recent Request for Proposal processes we have managed, Novitex is starting to be competitive in regards to contractual terms in order to retain current business. We attribute this to the merger.  However, if your contract is coming up for renewal or you haven’t reviewed your contract in a number of years, now could be an ideal time to do it.  Novitex wants to retain business and the devil you know (Novitex) is better than the devil you don’t (Exela Technologies).  More importantly, you want to make sure you do have contract terms that allow maximum flexibility in case this merger impacts Novitex’s service levels.