Acquisitions have been as much a part of bank technology companies as introductions of brand new solutions and healthy organic growth. Now all three are waning.In the 18 years I have been counting, the peak year of 39 acquisitions occurred in 2004. The fewest (7) occurred in 1996. An average year had 22 acquisitions. There were 10 in 2009.
But Fiserv was king in the acquisition of companies, racking up a total of 152 since the company was established 26 years ago. So this first-time event of zero is an attention grabber. I never thought I'd see the day.
The year 2009 also made acquisition headlines as a result of what I believe were the two biggest events of the past 47 years in the bank tech space. The first was the entry of an outsider (a title insurance company) that in seven years has become #1 in terms of revenue. Fidelity National Information Services (FIS) did the job by acquiring 15 companies. If you look behind the 15, you'll find 59 additional companies because the acquired companies were doing their share of acquisitions also. The second biggest event was the acquisition of Metavante by FIS.
The next big question is, How will bank tech companies adjust to a no-growth marketplace that so far everyone seems to believe was caused by the Great Recession, subprime mortgages and a handful of Wall Street firms? Even when these three wounds heal, I see 13 reasons why the "patient" will be back in action even though none of the 13 will win Olympic-type medals.
There's a giant size hint of future acquisitions out there that I've tuned in to, perhaps having something to do with my Dallas location. When three huge hardware companies (Xerox, H-P and Dell) witnessed some leveling off of their traditional business, they went after ACS, EDS and Perot Systems. It's as if they had gone to a cocktail party for a graduate and the guy whispered "computer services."
In my view, the bank tech companies have something sweeter than just computer services. They have a vertical industry that it just so happens ten huge generic services companies don't have. Even ACS, EDS and Perot Systems didn't have banking expertise like our guys have. And the generics have been non-vertical for decades. Could it be that they are attending the wrong cocktail parties?
Does anyone believe the banking industry is dead in the water? Will the Congress finally sink the banking industry with its idea of reform? Will banks be able to make money the old fashioned way? Somewhere in that fog, I believe new regulations might result in a whole new category of technology products called Reform Solutions. That's my 14th reason for a bank tech industry comeback. What was very good for the goose all these years might just be even better for a gander. Are you awake yet IBM, ACN, and CSC?
There's a bright spot in all of this. For shareholders of the Big Three bank tech companies, maybe more of the same flat news is really good news. The value of FISV increased 49% in the past 12 months. JKHY increased 47%. FIS gained 32%. Now there's a reason to have a cocktail party no matter who whispers what.