An eDoc duo: two players in the electronic document delivery space have found each other, and the marriage looks promising. eLynx acquired SwiftView to create a complementary new company to serve both large and small mortgage lenders.

After 25 years of entrepreneurship, John Corrigan and Randy Prakken had come to a turning point in their lives. The partnership they founded back in 1981 had eventually evolved into SwiftView Inc., the Portland, Oregon-based electronic document view, print and share company. The company's flagship product is the SwiftView[R] Viewer, a leading, if not dominant, document viewer for the mortgage industry, and SwiftSend, a secure-document delivery service. [??] Corrigan, now vice president of engineering at SwiftView, and Prakken, vice president of products and operations, realized that while they succeeded far beyond their original business concept, as they were getting closer to retirement age, most of their assets were wrapped up in the company. It was time to pull some value out. [??] "They both felt like now they have reached a point--and it applies to me, too--where they [have] a fair amount of equity in this company and not much equity outside," explains Steve Bachelder, SwiftView's president. "Financial prudence dictated that we liquify, but not necessarily sell the company." [??] The SwiftView executives investigated their options, but as various discussions progressed it became clear, says Bachelder, "there was a real opportunity to push the business we were in by combining with another company that had more resources." [??] Among the companies SwiftView approached was Bethesda, Maryland-based American Capital Strategies Ltd., a Nasdaq-traded buyout and mezzanine fund. What American Capital does is invest in companies it believes it can help grow faster by bringing more resources to bear. More to the point, one of the companies sitting in American Capital's portfolio is Cincinnati-based eLynx Ltd., SwiftView's principal competitor in the electronic document-delivery business.

"American Capital Strategies invests in small to midsized businesses by providing debt and equity, and guidance to help companies grow," explains Phil Huff, president and chief executive officer of eLynx. "So, we are one of about 180 companies that are part of about a $9 billion portfolio."

Huff, who co-founded eLynx, has also served as the company's vice president of business development and sales and chief technology officer. Today, he steers the company's vision and direction, while providing hands-on support to eLynx's management team.

Despite the competitive positions in the electronic-documents markets, the executives of SwiftView and eLynx took a liking to each other.

"We kind of hit it off with American Capital and eLynx, as we had the same notions about product direction, opportunity and management styles," says Bachelder.

"The SwiftView folks realized how much of a good match we would be, and reached out to American Capital," Huff notes. "Our parent company knew of SwiftView and my strong, positive feelings about the company, and brought the idea to me immediately."

As a result, the two decided to combine their businesses. On Oct. 3, eLynx officially announced it had acquired SwiftView. Together, says Bachelder, the two companies will have about 75 percent of the market for electronic delivery of mortgage documents.

But it's a little more complex than just two companies merging, observes Prakken. "If you look at companies in the [electronic document] delivery business, it's mostly SwiftView and eLynx. We have three-quarters of the business. There are a couple of other smaller competitors, and there are also a number of document-preparation companies that are doing more basic versions of Web delivery."

Together, the companies will serve more than 500 customers in the financial-services and insurance industries, including 17 of the top 20 lenders, eLynx reports. In total, more than 10 million financial transactions involving consumers, lenders and settlement agents will be serviced by the larger eLynx enterprise in 2006.

Tying the knot 

The eLynx business can be summarized in this quick statement by Huff: "We focus on streamlining business processes." The company does that in a number of ways, and in the mortgage banking space by moving documents and content over the Internet, providing tools to collaborate on mortgage documents and providing outsource services in regard to eDelivery or eSignature.

The company was founded in 1994 as MigraLynx Systems Inc. to fill the increasing demand for both cost-effective and secure digital transmissions for documents and information. In the late 1990s, MigraLynx pioneered a Web-based electronic document-delivery service, and in 1999 the company changed its name to eLynx--and the eLynx Web Posting Service (WPS) was launched. By 2000, the eLynx offering supported full-system integration by interfacing with any client document-origination system to capture native document print-stream, ensuring original, unalterable documents at delivery. In 2006, eLynx broadened its focus to include student loans, commercial and home-equity lending, insurance and other paper-intensive industries.

SwiftView can be viewed, so to speak, as a company in two related fields. First to consider is the SwiftView Tools Division, which packages Microsoft[R] Windows[R] documents and printer-ready printer control language (PCL) and Hewlett-Packard graphics language (HPGL) data into efficient and accurate portable electronic documents and drawings. (SwiftView can view and print a variety of data formats: PCL, which is the format in which data flows from a computer to a Laserjet printer; HPGL, which is Palo Alto, California-based Hewlett-Packard Co.'s language for engineering drawings; and tagged image file format [TIFF], a common language used by fax machines and scanners.)

Most people use PCL or HPGL in their work. Whenever anyone prints a document on a Laserjet-compatible printer or plots a drawing on a Hewlett-Packard plotter, he or she uses PCL or HPGL. These are original documents, not conversions, so distributing them avoids printing inaccuracies that can occur when originals are converted to other formats such as San Jose, California-based Adobe Systems[R] Inc.'s portable document format (PDF). Documents in PCL are widely used within the mortgage industry to produce the closing-document sets delivered to title companies for this very reason.

SwiftView's second and fastest-growing division is Swift-Send--the secure, Web-based document-delivery and management service that now contributes about 70 percent of the company's total revenue, says Prakken. "As important as SwiftView Tools has been historically to the company, it is not the sole revenue-generator, as it was five years ago," he says.

SwiftSend, like eLynx, began as a secure Web-based document-delivery service, saving lenders the time and cost of printing and sending closing documents to settlement agents via overnight courier. "Lately, new services have been introduced that enable lenders to get rid of paper in all phases of the loan process, from application and processing to underwriting, settlement/closing and investor delivery," adds Prakken. "Where lenders could save $15 or so by going to electronic delivery, the new services have the potential to save lenders hundreds of dollars per loan, and cut many days out of the loan cycle."

For example, three-day disclosures can be sent to the borrower and signed electronically--not only saving time and money, but more significantly, often doubling the conversion rate of prospects to customers because it can happen in real time, often while the lender still has the prospective borrower on the line.

Borrower documentation, appraisals and other documents necessary for underwriting can be received into eLoanFolders[R], enabling faster access for processors and underwriters. Closed-loan files can be delivered electronically to investors and quality-assurance (QA) services, saving time and making capital more productive.

Although similar and competitive, the companies mesh well because they serve largely complementary markets. "Whereas SwiftView offers desktop tools for small, medium and some large businesses, eLynx has back-end office and legacy integrations that focus on enterprise-level [across the entire business] document delivery and management," Huff explains. "Because of that, we have tended to focus on the taller trees."

Essentially, eLynx has gone after the bigger lenders such as Wells Fargo & Co., San Francisco, and Washington Mutual Inc., Seattle. The company serves more than 100 customers throughout the country, including 17 of the top-20 lenders, explains Huff.

eLynx went after the biggest fish in the lending industry, and it built technology suited to large operations. The companies using eLynx might have hundreds of people creating documents and sending them out for closing. "For that, you have to have a more standardized method that people do not have the discretion to alter," Bachelder explains.

"Our approach is a little more flexible, because we focus on individual desktops, something installed on an individual computer. We can give options or choices. SwiftView is perfect for an operation with, say, 40 people who can operate more autonomously. We have a different approach."

Succinctly categorizing the two approaches, Bachelder sums up: "The desktop approach may not make sense for a large operation, but eLynx's approach may not make sense for a small operation."

Together, the two companies can cover both big and small lenders. While document delivery and management is decidedly a niche technology, it's a necessary service, so the nowbigger eLynx looks to be in a good space going forward.

After bumping into Huff at the Mortgage Bankers Association's (MBA's) 93rd Annual Convention & Expo 2006 in Chicago in October, Joe Filoseta, executive vice president and general manager of the Seattle-based Mortgage Solutions Group of the John H. Harland Co., Atlanta, told him, "This merger makes sense for everybody."

The merger was an important event for Filoseta, as his company has been a long-time business partner with SwiftView and eLynx. In the past, SwiftView was the more important partner, but as the Mortgage Solutions Group's customer base for its loan origination technology began to migrate to bigger players, eLynx technology became more appropriate.

"We worked with SwiftView in terms of the secure document delivery it offered," explains Filoseta. "We make it available and have integrated it tightly into our mortgage software and solutions. It works for us because our customers need a secure means of moving documents from origination operations to the closing location associated with a particular borrower."

Traditionally, Filoseta's customers have been in the middle market, originating mortgages annually in the $5 billion range. In the past couple of years, however, Mortgage Solutions Group has begun to migrate to bigger originators, and this meant revisiting its partnership with eLynx. "As we have continued to move our customer profile into larger customers," says Filoseta, "the type of infrastructure that eLynx brings to the secured document-delivery market is more palatable to larger-lender requirements."

Now the Mortgage Solutions Group can make needed document-delivery software changes, but stay with the same company.

"There are so many things SwiftView does that are different from what eLynx does, and if you put those two sets of tools and customer bases together, you have synergy," says Huff. "That is a much-overused word, but you truly have it. As a combined entity, we have the tools that will make a difference in industries going paperless."

Huff, however, is in no rush to merge the different technologies. From the start, SwiftView and eLynx have been able to share networking information and even aggregate information about closings, but because they each provide separate functionality to separate customers, Huff sees no reason to replace one technology with the other or merge the two together.

One nice tie-up has been the data-center situation. SwiftView's are basically in the West, in Beaverton, Oregon, and Denver, while eLynx's can be found in the East, in Chicago and Atlanta. Combined, the bulked-up eLynx gets true dispersal and a sales presence from coast to coast.

Huff will remain based in Cincinnati and Bachelder in Portland. The company will keep offices, operations, support and staff in both cities.

Histories

In the 1970s, Corrigan and Prakken were working at Hughes Aircraft Co. in El Segundo, California, when they were both separately recruited by COMSAT Integrated Systems, the Palo Alto, California, unit of Washington, D.C.-based Communications Satellite Corporation, better known as COMSAT. The two met at COMSAT Integrated and became friends. While at COMSAT, overriding many of their personal discussions was the thought that they could do something on their own.

"This is where we got the entrepreneurial bug," laughs Corrigan.

The one problem was that Prakken, a native of the Pacific Northwest, wanted to move home. That would mean leaving the aerospace and satellite business, which was centered in California. But the lure of coming back to the Northwest was so strong that Prakken and Corrigan left their well-paying jobs to move to the Portland, Oregon, area and do software-development work.

In 1981, the two started as consultants, finally incorporating in 1985 as the Northern Development Group (NDG). "In consulting, we tended to focus on a specific area, and that was graphics," explains Corrigan, "and we built up a core set of software. Eventually, we felt a product would emerge from that, and one did--the SwiftView Viewer."

In 1991, NDG introduced SwiftView, a viewer of PCL, HPGL and TIFF print-stream formats, and the consulting firm shifted gears to become a product company. "The viewer was a very simple product, and we figured out how to integrate it into other systems," says Corrigan. It worked well enough that some big companies such as Chrysler and NCR used the product for large custom applications.

Basically, this period as a tools company lasted from 1991 to 1995, and then something called the Internet began infiltrating the popular and commercial culture. By 1997, SwiftView had created innovative licensing schemes that could be marketed through the Internet, enabling cost-effective viewing of virtually any PCL or HPGL file for enterprises that have licensed SwiftView technology. The company then moved all its marketing and sales processes to the Web. With the popularity of the Internet increasing, SwiftView sales begin to take off, growing by 45 percent for several years until the recession hit in 2000, the company reports.

At that point Corrigan and Prakken, who were both engineers, decided they needed to bring in professional management, and they found Bachelder. Together, the three decided further growth required developing a complete solution rather than just a software tool, and it required focusing on a vertical market in which SwiftView could identify prospective customers and market proactively to them.

This was also about the time SwiftView began seeing a lot of new mortgage service customers who were using its software tools to help distribute and view loan documents.

"Bachelder moved us into the SwiftSend service, which is the third evolution of the business, and into the mortgage sector, where we could do a better job of supporting eDelivery of closing documents than companies were trying to do on their own--and we grew rapidly," recalls Corrigan.

"We had the ability to handle PCL documents very effectively, and we make sure they could be printed remotely by recipients regardless of the type of printer or computer systems. This was critical, because there are literally thousands of combinations of printers, operating systems and browser versions out there, and we could cut printing problems by orders of magnitude, cutting support costs dramatically."

Dynatek Inc., a Livonia, Michigan-based loan origination software vendor, began working with SwiftView about three years ago, and the relationship has deepened since, reports Todd Luhtanen, Dynatek's president and chief technology officer. "We are partners. We have what Dynatek calls a Plug-In Partner Network, and that means all of our customers are aware of their technology, and their processes can be accessed through our system."

Dynatek itself did not have a technology for electronic document transfers, so it decided to partner with a specialist, as it was a service desired by its customer base. Originally, Dynatek and SwiftView kept to an arms-length relationship, adds Luhtanen, "but a number of our customers expressed an interest in SwiftView, noting its array of document-delivery services. Based on that, and our working with them directly, we determined that SwiftView was a quality company with products desired by our customers."

In the past, most closing documents were either sent via overnight couriers or as an attachment to an e-mail. Sending them electronically eliminated courier fees of $15 or more per set, but the problem was these documents contained private personal data that lenders were required by law to protect, and e-mail simply was not secure enough. What SwiftView and eLynx did was to create secure Web sites where the documents could be posted and accessed under strict security controls. Through these Web sites, a title company, for example, is now alerted about a pertinent document and then logs on and securely downloads the document to its own computer for printing.

SwiftView's twin-product growth strategy proved successful, driving steady revenue increases by building up its sales force and reputation, and creating additional features and services for either SwiftView Tools or SwiftSend. By 2006, the company reports, the customer count had grown to more than 3,000 for the software tools and more than 400 lenders for SwiftSend.

New opportunities

"We were pretty conservative as to the way we managed our business," Bachelder says of the old SwiftView. "We never took chances; we incrementally took one safe step after another. We were fortunate that the launch of our eDelivery service coincided with the beginning of a mortgage industry boom period, so we didn't have to be all that aggressive to do well."

The downside of such conservatism is that a company doesn't grow or expand as fast as it possibly might, but the upside is the company doesn't fold when a downturn hits.

This is not to say SwiftView didn't experience considerable growth. The Portland Business Journal has named SwiftView one of Oregon's fastest-growing technology companies for seven years running. "Up until the 2000 recession, we were growing about 45 percent a year," says Prakken. "After 2000, we have been growing about 30 percent to 35 percent a year--but, of course, that's on a bigger base."

The big growth for SwiftView came in the eDelivery services end of the business, driving a quadrupling of the company's revenues since 2001, says Prakken. "Document delivery and the new paperless disclosure and eFolder services are where most growth is coming. About 425 companies now use Swift-Send," he says.

The acquiring company, eLynx, has fewer customers, but they tend to be much larger on average. As a result, eLynx was the larger company--but how much larger, Huff won't say. "We don't disclose revenue information," he explains.

Bachelder suggests his company could have grown considerably faster if he and his partners had felt it more financially prudent to be more aggressive. As he sees it, the merger with eLynx will finally let SwiftView reach its potential. "As part of a bigger company," he says, "we have increased market share and reach a broader and bigger customer base. We can speed up what we are doing. We can be more aggressive. When you don't have all your net worth on the line, you can be more aggressive in your business dealings."

As an example, Bachelder says, SwiftView really wanted to make a big move with SwiftSend into the insurance business, because it already had insurance customers that used its software, and there is similar potential for eliminating paper in that industry's processes. But it never did, because, as Bachelder observes, it takes considerable time, investment and management bandwidth to get to profitability in a new vertical.

But eLynx has already made that move, clearing the way for SwiftView to join for a strong push into insurance for electronic approvals for carriers and agents, document collaboration and paperless processing.

The real advantage in hooking up with an equity investment firm, says Bachelder, is that it has longer horizons; American Capital Strategies' objective is to increase the value of an enterprise over four or five years.

"Together, there is going to be marketing and sales advantages, economies of scale and, as we get to know each other's products and operations in detail over the next few months, we will have a common product direction rather than each developing new systems and features," says Bachelder.

As a bigger company, eLynx historically had objectives in terms of expansion that were more moderate than SwiftView: 20 percent growth annually. "That's sustained growth, and we were sometimes above that," reports Huff. "We can grow faster than that as a combined company, and we will grow faster than that."

American Capital Strategies has helped eLynx with organic growth and now opened the doors for the company at banks and to do acquisitions, Huff adds. "Our goal is to grow eLynx significantly over the next three to five years, and our parent company supports us in that."

"eLynx's cash flows, entrenched customer relationships and position as the industry standard for secure EDD [electronic document distribution] solutions within the mortgage space make it an attractive investment. We are thrilled to have the opportunity to invest alongside eLynx's management team," says Todd Wilson, a principal at American Capital. "As several positive trends affect both the mortgage industry and the adoption of electronic delivery over the coming years, eLynx can look forward to significant growth opportunities in the mortgage space and other verticals within the financial services industry," says Wilson.

The acquisition was seen by Huff as a "decisive" move to strengthen its position in the marketplace, deliver greater value to customers and partners, and provide a comprehensive suite of services including electronic and paper fulfillment, electronic disclosures, electronic signatures, electronic loan folders and investor delivery.

Being a bigger company, Huff adds, "gives us the opportunity to look in a new direction, invest more money in research and development, and invest more in sales. The key focus is growth, and there are a lot of areas in our minds where we want to grow, but it takes momentum to do that."

Huff's objective is for the new eLynx to continue double-digit growth over the next three to five years. "That's a reasonable target," he notes. "We have the momentum and infrastructure to attain that goal. Quite frankly, simply rolling out the best of our combined products to each other's customer bases can get us close to that revenue target. So, yes, it is very doable, and we know how to make it happen."

Steve Bergsman is a freelance writer based in Mesa, Arizona. He can be reached at [e-mail].