A Combined Jack Henry/Goldleaf a Bigger Deal Than it Appears

At first blush, the planned acquisition of Atlanta-based Goldleaf Financial by Jack Henry & Associates may not seem like an earth-shattering move by the Monet, Mo.-based banking solutions provider. However, looking beyond the obvious, there is a lot more to it, says Celent senior analyst Bob Meara.

Meara follows the ebb and flow of the core systems market closely. Although he wouldn't put this deal on par with Fidelity National Information Systems' (Jacksonville, Fla.) pending acquisition of Metavante (Milwaukee), Meara does say JHA is making a statement.

"Goldleaf is not a big company—certainly not by U.S. core system vendor standards—but the acquisition may be bigger than it appears," he told BS&T. "For its size, Goldleaf has a large share of the distributed capture market. With more and more financial institutions adopting branch capture (in many cases at the teller line), JHA was wise to be interested in Goldleaf's installed base. Conversely, JHA is the teller system of choice to roughly 12 percent of small banks (<$1b in assets) and 18 percent of midsize banks ($1b to $10b in assets) by our calculation. That's a great installed base of teller systems to equip with distributed capture technology."

Meara says integrating teller and capture systems properly has been a tricky proposition. JHA may have found the solution with Goldleaf. Since the passage of the Check 21 legislation, he notes "there have been relatively few 'certified' integrations, and Goldleaf leads the pack. Its experience in this area will likely prove valuable to JHA which, despite its size, has had little to show in this area."

Meara expects to see continued acquisitions and consolidation among the vendors in JHA's space for two main reasons: the current environment is making it tough for the smaller, more focused software vendors to survive; and check imaging is still a "hot" area compared to other areas of technology spending in financial services.

"This [deal] certainly isn't in the league of FIS/Metavante," he comments. "It's more in-line with the multiple other acquisitions JHA has pursued and branded under the ProfitStars umbrella. That said, core systems come up for renewal every several years, and the providers are seeking competitive advantage wherever it can be found. This move with Goldleaf is a good play in one of many relevant non-core system areas."