Bisys Group Inc. said it has signed a definitive agreement to acquire Document Solutions Inc., a leading provider of check imaging software to community banks.
Bisys, the computer services company based in Little Falls, N.J., said it will give stock worth $38 million for Document Solutions, which has installed its systems in 125 banks over the last three years and claims a 70% share of the community bank imaging market.
"We've been talking to Document Solutions for a long time and we think their software is the best available for community banks," said Lynn J. Mangum, chairman and chief executive officer of Bisys, which does outsourcing for more than 400 banks and has 4,500 bank and corporate customers overall.
The Document Solutions deal augments Bisys' service offerings while contributing to planned growth both internally and through acquisitions.
Document Solutions can immediately help Bisys round out its product line and "meets our strategic criteria in that it has a commanding lead over its competition, enjoys high margins, and is growing significantly faster" than stated objectives, Mr. Mangum said.
Document Solutions, meanwhile, will get "the talent and other resources" it needs to take its imaging business to a new level, said Document Solutions president Bill Butler.
The four-year-old image solutions company has a backlog of 55 installations. Some industry observers said Document Solutions grew too fast too soon, which may have contributed to the untimely death last year of its founding president, Robert M. Tripp.
"We've had terrible growing pains," Mr. Butler said. "We've been doubling the business (annually) since we've been in existence."
Mr. Butler said the company's long string of successful installations helped it attract serious interest from several potential buyers. Bisys won due to its compatible, down-to-earth business and operational and management styles, Mr. Butler said.
"By all measures, Bisys brings some management skills and some size to the company so we can continue at the same rate without stumbling," he added.
Document Solutions will operate independently within Bisys' information services group, said Bisys president and chief operating officer Paul Bourke, who will oversee it.
Experts said the merger will greatly benefit Bisys, which can add its own file-folder capabilities and services to Document Solutions' product line. Mr. Bourke said the ability to be a single-source imaging provider "will significantly enhance the operations and customer service benefits to our bank partners."
"At $38 million, Bisys may have paid up (for Document Solutions) a bit, but that's not out of line for a very profitable business," said F. Mark Dannolfo, a managing director with Adams, Harkness & Hill, a Boston-based investment bank and brokerage firm.
He said Bisys' target is to grow "10% to 15% percent internally, which they did this quarter," and 15% to 20% through acquisitions.
Bisys' most recent major acquisition was Concord Holding Corp. last year, which added significantly to its presence in administration and distribution of mutual funds.
Although banks generally favor such mergers, M. Arthur Gillis, president of Computer Based Solutions Inc., New Orleans, questioned Document Solutions' need to be bought.
"Right out of the chute, Document Solutions did a fantastic job of building a system at the right time and with the right people," remarked Mr. Gillis. But he said the company wasn't desperate for capital infusions and "could have survived on its own."
