When the U.S. Department of Justice announced in February that it was ending its investigation into the acquisition of Atlanta-based payments provider S1 Corp. by ACI Worldwide, it ended a rather long and convoluted saga. With the legal hurdle behind it, now the new combined company can turn its focus to communicating its strategy and road map going forward to its customers and the marketplace.
ACI, a New York-based international payments systems provider, initially agreed to acquire S1 for approximately $360 million in cash and 5.8 million shares of ACI on Oct. 3 last year. The ACI deal came about after Jersey City, N.J.-based payments company Fundtech announced its intention to terminate a merger agreement into which it had previously entered with S1. After that deal fell through, Fundtech accepted an acquisition offer from Chicago-based private equity firm GTCR.
Before the DOJ closed its investigation, the companies were not able to present a clear strategy to the marketplace, according to Christine Barry, research director at Aite Group. This uncertainty resulted in "a lot of questions from customers and prospects of both companies." But now those questions can be addressed. "It is just going make it a lot easier for the company to communicate strategy, so its customers can become more comfortable and see how the systems will integrate," Barry says.
Leveraging Product Synergies
Barry notes that existing and potential customers will be able to benefit from several synergies that exist between ACI and S1. For example, on the cash management side, Barry says, "The company will be able to offer a product that incorporates the best of two leading solutions in the marketplace, a stronger global presence and a broader product portfolio." Considering that banks currently are investing heavily in cash management, Barry adds, this could be a boon to the company.
Barry also says the acquisition will help the combined company reach new markets. S1, she explains, had a stronger presence among small banks, which should help ACI better penetrate that market.
Barry does note one potential downside that could result from the acquisition: While the acquisition details and integration of S1 are being worked out, she says, existing customers "could feel that their needs aren't being met." However, Barry continues, ACI can alleviate that if it has "a solid plan in place" for communicating with its customers.
Overall, Barry sees the S1 acquisition by ACI as part of an ongoing consolidation trend among financial technology companies. "We are seeing a trend that 'bigger is better,'" she says. "So we're seeing some of the niche players joining forces to broaden their product portfolios, and I would expect to see more of this going forward."