US suitors Relativity and Reveal cast an eye over Nuix assets

Nuix chief executive Jonathan Rubinsztein.

US software companies Relativity and Reveal have been running the ruler over assets of the embattled forensic software company Nuix.

Relativity, which offers legal and compliance software solutions, is said to have weighed a purchase of Nuix before it floated on the Australian Securities Exchange in 2020.

Reveal, which operates in intelligent automation services, was founded in Australia.

There is also a suggestion that private equity may be considering an acquisition, with a company such as Bain Capital a potential contender.

Nuix was floated by Macquarie Group, which was a 65 per cent owner of the business.

When it listed, the company was worth $1.8bn excluding debt.

But the float was a disaster after unexpected profit downgrades and a probe into its prospectus forecasts and continuous disclosure.

Its market value is now $217m.

Despite its challenges, Nuix is considered to be fundamentally a good business.

It had been generating $60.6m of earnings before interest, tax, depreciation and amortisation for the 2020 financial year.

The deterrent for a buyer is a legal case being brought against Nuix by former chief executive Eddie Sheehy, who is claiming $183m over options in the business.

As well as a legal case and a class action, Nuix has also been the subject of an investigation by the Australian Securities & Investments Commission over its market disclosure.

ASIC had been examining the company’s pre-listing financial statements, but said at the start of the year it would not take any action over that matter.

The corporate watchdog is also investigating Nuix’s former chief financial officer Stephen Doyle over an alleged insider trading case.

Nuix’s legal woes mean that any buyers would probably be keen to buy Nuix assets rather than bid for the company as a whole, so that they would not be on the hook for all of the additional costs.

The challenge for a buyer would be to drive down costs and find new growth opportunities.

For the year to June, Nuix made a $22.8m loss after reporting a $25.2m net profit in the previous financial year.

Revenue for the year fell 13.5 per cent to $152.3m, with the company ruling out the payment of a dividend.

Cash receipts from customers were $172m for the 2022 financial year after it struck some multi-year deals.

Nuix software allows users to make sense of huge amounts of data. The company provides services to governments, advisory law firms and large corporations around the world.

Sources say that the Nuix chief executive, Jonathan Rubinsztein, who joined in January from Infomedia, is welcoming offers from suitors.

He said while reporting results last week that the worst – which included regulatory scrutiny, legal action from former executives and poor earnings – was behind the company.

Nuix’s “strategic refresh”, which will see the company shift its operating model to consumption-based subscription services, will soon start paying dividends.

Interest in Nuix comes as cashed-up private equity firms are said to be circling the Australian listed market for buyout opportunities in the technology space after tech stocks were sold off during the pandemic.

Last week, Thoma Bravo launched a $1.1bn buyout proposal for mapping software company Nearmap.

Another business that is being closely watched is Bravura.

Private equity firm Affinity Equity Partners considered buying the $416m company, which provides software solutions for wealth managers and fund administrators, about six months ago.

Bravura is rolling out a technology project for Aware Super worth more than $120m, and expectations are a suitor would wait for that to be completed before contemplating an acquisition.