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Management Strategies

11:51 AM
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Analyst Says Dueling Bids for S1 Denote Trend Toward Consolidation

Mergers and acquisitions heat up as vendors strive to become "one-stop shops" for banking products and services in strategic areas.

New York-based ACI Worldwide's aggressive proposal to acquire Atlanta-based S1 Corporation despite a standing merger agreement between S1 and Jersey City, N.J.-based Fundtech denotes a larger trend toward consolidation among vendors in the banking technology space, according to Madhavi Mantha, principal and head of banking research at New York-based consulting and research firm Novarica.

"There's quite a bit of consolidation happening within the financial services technology vendor space," says Mantha. "There seems to be a move toward solidifying capabilities in strategic areas -- building up scale in areas where there are other vendors offering complementary products and services."

Over the past few months, the race to expand has heated up in the payments market in particular. Mantha points to moves such as Fiserv, Inc.'s $465 million acquisition of CashEdge and FIS' bid on Misys PLC last June.

Mantha says that driving that movement is the desire to become a "one-stop shop" for banking products and services within specific areas, such as payment solutions.

Last March, ACI announced the acquisition of payment systems provider ISD Corporation, noting that the move was part of a larger growth strategy. "Only time -- and the shareholders -- will tell" whether S1 will further enhance ACI's growth, notes Mantha.

S1 and Fundtech have been silent since Tuesday afternoon, when they both acknowledged that their merger agreement is still in effect.

At least two law firms -- Los Angeles-based Glancy Binkow & Goldberg LLP and New York-based Faruqi & Faruqi LLP -- have launched investigations related to the proposed acquisition of S1 by ACI. Both firms say they're looking into whether S1's board of directors breached their fiduciary duties to stockholders by failing to adequately shop the company before entering into a merger agreement with Fundtech.

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