2001 was a quiet year for grandiose acquisitions in the bank data processing market. With maybe one exception, there were really no blockbuster deals like we’ve seen in recent years. No Phoenix Internationals going belly-up. No Aurum Technologys jumping into the fray. No Jack Henrys purchasing credit union systems (Symitar). No sir, this year most of the players have been sleepy. Maybe it’s market conditions; maybe, as many experts think, vendors are perfecting the acquisitions they made in 1999 and 2000 — working on the synergy lie.
But there were a few gems that blipped on the Gonzo Radar. Here’s our take on some of this year’s more noteworthy acquisitions:
Very nice! This is colossal news for NCR customers and Fiserv alike. NCR left its bank and thrift clients floundering with stagnant products for a shamefully long period of time. First, Autobank was to be the solution to Starcom customers’ troubles. It wasn’t. Not by a long shot, bubba. So, the next savior was a transition to the domestically unproven Sanchez Profile/Anyware product. Very few Starcomers bit. Then NCR bought another year of survival by using price as a heavy hammer to retain clients. Trust me, NCR wasn’t dumping much cash into R&D with such cadaverously thin margins getting booked. A few weeks ago, NCR finally showed some mercy and sold out. The faster Fiserv (and its competitors, for that matter) can convert these former NCR customers onto a product that will be supported and developed, the better.
At first blush this acquisition is a real skull-dragger. OSI is known for its client/server platform, Oracle database and pretty technology. Sound, while effective enough as a loan processing solution, does not exactly have the cutting edge technology reputation to make the propeller-heads sweat. So, I read this buy as a cash flow grab. However, there could be some cross-sell opportunity between the OSI and Sound customer bases, and Sound is bound to have some smart, experienced managers who can contribute positively to OSI.
Bravo! Via acquisition, Aurum Technology increased revenues by $30 million and grew its client base by over 35% this year. This type of growth is crucial to a company that is both early in its life cycle and owned primarily by investment bankers. Aurum achieved this growth by quietly acquiring four regional core players. Aurum bought one in-house core provider (Data Dimensions) and three outsource providers (Morningside Corporation, Midway Data Centers and GFS Technologies). Midway and GFS also run item processing centers, a side service that is crucial for Aurum to serve its mainly sub-$2 billion client base. Kudos to Aurum on this one. The bigger test, of course, will be how gracefully Aurum transitions its acquired customers to Aurum products and maintains service levels on the old products until they’re inevitably sunsetted.
While Brokat is better known as a business cash management solution internationally than it is for its domestic retail presence, the technology is elegant and the potential to cross-sell to Metavante’s large clients is huge. With the chaotic, failed S1 Internet relationship followed by the coldly received, morphed ADP cash management product being sold as a retail product, Metavante needs a credible retail Internet banking strategy that will stick. Like the situation facing Aurum, the proof that Metavante finally has its act together on the retail side of Internet banking will be how smoothly, and at what cost, it is able to transition its customers that are now running one of its sunsetted, discontinued, or otherwise former Internet solutions to Brokat.
This one leaves me scratching my truly enormous dome. I suppose if you’re open minded you can believe some of the official announcement’s claims that SDI’s branch automation, call center and CRM software will help S1 deliver on its Enterprise eFinance Strategy. This is, of course, S1’s multi-channel, multi-application, multi-touchpoint e-commerce innovation strategy that S1 says takes “a customer-centric view of the enterprise and delivers multiple applications across multiple channels resulting in a compelling experience for all financial customers.” OK, clear as a spring morning now. Rumor has it that the hyper-synergistic nuances of this deal will also help solve the problem of new accounts reps having to double enter the customer’s name, address and phone number to book a new checking account.
This deal did offer some cross-sell and cash flow opportunities for S1, and far be it from me to bash S1 for acquiring a company with the proven ability to turn a profit. And there were obviously some pretty big financial opportunities in a down market for the SDI principals. But, the strategic fit seems goofy to me. I’m just a consultant on the sidelines, so somebody please set me straight here.
This is a group of M&I EastPoint client/server customers who bought the product when Metavante announced that the system was for sale. This warm, power-to-the-people story shows some promise but is fraught with risk. These co-op-like data processing business endeavors tend to fail in the long term, falling victim to vicious fights for development direction and hardcore political infighting. Examples of such failures include but are in no way limited to IGIC, COCC (in its pre-OSI days) and Financial Partners, Inc. (the group of Farm Credit banks) That said, I hope this works. With Phoenix off the scene, the market could use another strong client/server player.
It was a little slow on the acquisition front this year, GonzoMongers. Next year I look for more consolidation in the Internet banking world (way out on a limb there, I know) and continued purchases of Internet-based lending and payment companies by the core big boys such as Fiserv and Metavante.
-smh