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Management Strategies

09:56 AM
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Bank Tech M&A Activity is Predictable, Most of the Time

It was during the dog days of summer a few years ago that things in the bank tech world got a bit boring. So I stuck my neck out with 30 predictions.

It was during the dog days of summer a few years ago that things in the bank tech world got a bit boring. So I stuck my neck out with 30 predictions.At the time, there were 30 independent bank tech companies that I believed might be the subject of acquisition activity. This is the way I predicted their destiny:

The original list of 30: Prime candidates: 18 Locked in to their present status: 5 Weak companies that no one wanted: 7

Today, that list looks like this: Prime candidates that got acquired: 12 The locked-in are still locked in: 5 One not-wanted became a wanted: 6 Number of prime candidates remaining: 6

One company that I never considered a candidate for acquisition was Metavante. In predicting the future, one usually relies on a combination of talents. In my case, I used mostly logic as the basis for acquisitions. For example, my kind of logic says, "Every tail (peripheral apps provider) needs a good dog (core apps provider) to wag it." That's why I expected CheckFree would be acquired three years before Fiserv did the deed.

Borrowing a line from "In Search of Excellence," the authors noted "the best companies combine a tablespoon of sound analysis with a pint of love..." In my case, I used a gallon of analysis with one drop of love. The analysis was based on Metavante's 45-year reputation of world-series-winning performance. The company also spent a ton of money to become public just 17 months prior to the FIS announcement. Additionally, Metavante is a dog-tail and everything in between. It provides everything a bank would ever need.

I still haven't figured out what my "drop of love" was for except that anyone acquiring Metavante would "love" the people. Even their customers love them, and that's saying something for any outsource company that processes close to a billion transactions every day and then waits for the 1-800 number to ring the next morning. At Brown Deer, the CSRs live a charmed life of performing more training for their customers than error resolution.

It goes to show you that what happens between the acquisition parties stays with the parties.

I know this sounds absurd but several years ago, the then CEO of M&I Data Services invited me to a users' group conference, and asked me to mix with the crowd. I did, and if those users are still eating nails for lunch, then you can expect a lot more than new management influence in directing the future FidVante's strategies. Metavante's customers didn't vote on anything. But in my opinion, they will wield a huge barrage of power.

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