After three acquisitions aimed at raising its online banking presence pushed it into default with its lenders, Concentrex has agreed to be acquired by John H. Harland & Co. for $140 million (CU Journal, July 24).
"We got clobbered by Y2K," said Matt Chapman, president of Concentrex Corp., in explaining why his company agreed to the purchase. "Financial institutions just stopped buying."
Chapman told The Credit Union Journal that business picked up somewhat after the first of the year, but then flattened out. "It became clear near the end of the second quarter," he said, "that it was not picking up at all." According to Chapman, many technology companies experienced similar downswings because of Y2K. However, at Concentrex, which had changed its name from CFI ProServices, matters were compounded by the debt the company incurred in order to make a number of key acquisitions in 1999. He added that although each acquisition was successful in its own right, the overall debt load became too much. Among those acquisitions was ULTRADATA, Pleasanton, Calif., and Meca Software and Modern Computer Systems.
Concentrex reported revenues were 30% short of projections during the fourth quarter of 1999, and posted a net loss of $13.9 million for the year after showing $3.9 million in profit for 1998.
"You have to take care of your customers and take care of your shareholders," Chapman said of the sale to Harland, "and this is an excellent way to do both."
According to John O'Malley, vice president and general manager for Harland, the events that led to Harland's offer began last fall when the company reassessed its strategic direction. As a result of that assessment, Harland began looking for key technology acquisitions to complement its own offering. "Some of the pieces that Concentrex had quite frankly filled in some of our white space," he told The Credit Union Journal.
O'Malley said that although there is some overlap in the product offerings of the two companies, he expects any such overlapping products to complement rather than compete with each other, and that it had no plans to shutter any company.
As for ULTRADATA, which Concentrex acquired last year, O'Malley said that it didn't play a major role in Harland's decision. "Concentrex would not have been as attractive to us," he said, "but there was still enough value in the company if you excluded ULTRADATA."
He claimed ULTRADATA clients will only benefit from the acquisition. "We can focus on where to make the investments now because we can afford to make them," O'Malley said of ULTRADATA future product development. He added that ULTRADATA clients can also look forward to much tighter integration with other Harland technology products, such as its MCIF package.
Chapman agreed, stating that ULTRADATA clients can look forward to a greater investment in customer support, as well as in product development. He also stressed the tighter integration across all Harland product lines. "They can sleep nights about the financial viability of their core processor," he added.
Harland, best known as a check vendor, also provides database marketing software, direct marketing management, and loan and deposit origination software to 1,700 financial institutions. Concentrex serves 5,500 financial institutions.
In an interview with The Credit Union Journal last year, Chapman mentioned plans to introduce the ULTRADATA system to the banking industry. He said now that planning is complete, and programming for the project should begin within a month. the banking product should be ready for rollout by 2001.
But O'Malley said that Harland had not decided yet whether to move forward with it.
