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Fidelity Continues To Build Scale in Banking Software

It's not just the banks that are consolidating, but the software providers, as well.

Following last year's acquisition of Alltel Information Services, Fidelity National Financial Inc. (FNF, Jacksonville, Fla.) has now announced its intention to acquire Sanchez Computer Associates and Aurum Technology.

In late January, the firm announced that it would acquire Sanchez Computer Associates Inc. (Malvern, Pa.), a provider of banking systems and outsourcing services for 400 financial institutions in 22 countries. Sanchez' core product, Profile, is a real-time banking-deposit and loan-processing system. The company has migrated Profile to the Linux operating system, making it one of the first banking systems to run on the open-source platform.

Shortly thereafter, FNF signed an agreement to acquire Plano, Texas-based Aurum Technology Inc. from an investment group led by Willis Stein & Partners, a private equity firm. Aurum provides core banking technology, including transaction processing, check imaging, electronic funds processing and branch automation. It has 1,100 customers, chiefly community banks and credit unions; it had $193 million in revenue in 2003. Fidelity National had more than $7.7 billion in revenue and earnings of $860 million last year.

Far-Flung Footprint

The two most recent acquisitions help Fidelity National Financial expand both at home and abroad, particularly with the Sanchez acquisition.

Sanchez' strength internationally-about 30 percent of its clients are overseas-based financial institutions-complements Fidelity National's base of U.S. financial institutions, says Christine Barry, an analyst with Celent Communications (Boston).

The latest round of consolidation in the banking industry, led by the mergers of Bank of America-FleetBoston and J.P. Morgan Chase-Bank One, is causing banks to re-evaluate their technology infrastructures with an eye toward replacing obsolete technology. (Editor's Note: See related article on page 11.)

The Linux-based Profile system is more advanced technologically than the older, mainframe-based Alltel system, Barry says, enabling Fidelity to better compete against the likes of Fi-serv, Metavante, and Jack Henry & Associates for banking systems and outsourcing services.

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Semper Fi

Recent Acquisitions by Fidelity National Financial

February 2004: Announced acquisition of Aurum Technology.

$305 million: $175 million in cash and $130 million in FNF stock.

January 2004: Announced acquisition of Sanchez Computer Associates.

$175 million: $87.5 million in cash and $87.5 million in FNF stock.

April 2003: Closed acquisition of ALLTEL Information Services.

January 2003: Announced acquisition of ALLTEL Information Services.

$1.05 billion: $775 million in cash and $275 million in FNF stock.

Source: Fidelity National Financial, Sanchez Computer Associates

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