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Let’s Make a Deal
The flurry of big technology-driven deals that have dominated the headlines in the bank technology business over the past month not only represent dramatic realignment in both the vendor and institution ranks, it also raises the question: So what happened to all the talk about organic growth? It's clear that the industry -- and Wall Street -- still views mergers as the best way not only to build market share, but also to gain efficiencies and scale.
The announcement of the Bank of New York/Mellon merger (see related article, page 18) underscored the reality that -- no matter how good banks become at analyzing customer needs, cross selling or pricing for profitability -- the preferred way to grow is to acquire. No doubt that reality is also what fueled the early-December speculation about deals involving Bank of America, Citigroup and Barclays (not necessarily with each other).
On the vendor side, it was Intuit -- not exactly a blast from the past, but certainly a player that has not been in the banking technology spotlight in recent years -- that garnered the headlines, with its planned acquisition of Digital Insight (for details, see page 15), as well as the announcement at press time that it also plans to acquire Electronic Clearing House (ECHO). Both deals are geared toward positioning Intuit as a strong competitor in the small and medium-size business market, and the ECHO deal "will expand Intuit's reach and capabilities in the fast-growing payments market," said Steve Bennett, Intuit's president and CEO, in a statement.
For those of us who have been involved in the industry long enough to remember when Microsoft tried to buy Intuit, it's interesting to see how things come (kind of) full circle.
Of course, the banking industry is not unique in its taste for M&As. According to PricewaterhouseCoopers, 2006 was likely to be a record year for mergers and acquisitions, with financial services, technology and telecommunications among the industries expected to experience even more M&A activity in 2007.
Still, for bank technology executives -- whether they work for a bank going through a merger or are customers of a solution provider involved in an acquisition -- the benefits of these deals are not always as apparent as they are to stockholders. Yet they are, in many ways, the people most affected. Is that a good deal?
Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio