Metavante Corp. has announced two acquisition deals in the last two business days and is looking for more to round out its product line.
The shopping is further evidence that the major outsourcing providers feel they must offer a wide range of capabilities to their bank, thrift, and credit union customers. And because both deals are for companies whose products are used in loan origination, they would open a new area of competition between Metavante and Fiserv Inc. of Brookfield, Wis., the largest banking technology vendor.
One analyst also said that the more companies Metavante acquires, the more likely it is that its owner - Marshall & Ilsley Corp., the Milwaukee banking company - would again have to think about spinning it off.
On Monday, Metavante announced an agreement to buy GHR Systems Inc. of Wayne, Pa., whose loan origination systems are used by such companies as JPMorgan Chase & Co., U.S. Bancorp, and Washington Mutual Inc. Metavante said it would pay $65 million, including about $55 million in M&I common stock.
Paul T. Danola, a senior executive vice president and the head of Metavante's financial services group, said the company signed the contract with GHR on Friday evening, just hours after it had announced an agreement to buy Treev LLC of Herndon, Va.
Treev is a vendor of document imaging technology. Metavante is to pay $19.5 million for it, including $17.6 million of M&I stock.
Metavante said it expects both deals to close in the third quarter.
Asked about further acquisition plans, Mr. Danola said: "We're not turning our head and stopping. I can't predict events going forward, but clearly we're interested in opportunities that would enhance our solution portfolio."
For Metavante, GHR will "fill a solution gap" in originations, he said. Though Metavante offers a wide array of data processing software and services for banking companies, it lacks a system for loan origination.
GHR's president, Cyrus Brinn, said it has about 70 customers, including 15 of the top 50 U.S. mortgage lenders. "Joining Metavante brings us even more stability and the ability to access a much larger part of the market," Mr. Brinn said.
Metavante has owned a 5% stake in GHR since 2000, he said. GHR's suite of products cover the lending process from applying for a loan to post-closing.
Treev's technology is used for converting paper documents into electronic image files. When underwriting loans, Mr. Danola said, "it's a lot easier to use an electronic document than a paper one that has to be sent through the internal mail system."
Mr. Danola said he expects Metavante to offer Treev and GHR products to its 7,000 financial institution customers.
Jeff Lebowitz, the founding principal of the Mortech LLC market research firm in Chester, Conn., said the GHR deal could open a new field of competition - mortgage origination products - between Metavante and its longtime rival Fiserv.
Fiserv offers origination programs for both large lenders and smaller ones.
GHR could also benefit from access to Metavante's customers, he said, but "I think it's likely to be a one-way flow." Mortgage companies are more accustomed than banks to dealing with multiple vendors, he said, so "I don't know how much cross-sell there will be from Metavante to GHR" customers.
Scott Cooley, an independent mortgage technology consultant in Los Gatos, Calif., expressed skepticism about cross-selling GHR's technology to Metavante's customers. "While it seems to make a lot of sense, I haven't seen it be highly successful."
GHR targets the top 100 mortgage lenders; Metavante's customers are mostly small banks. Mr. Cooley said mortgage lenders tend to look only at their own needs when evaluating origination systems, and may not care how they mesh with other business lines.
The GHR and Treev deals are Metavante's third and fourth this year. Last year it closed seven deals.
Richard X. Bove, an analyst at Punk Ziegel & Co., said Metavante's acquisition strategy will eventually affect M&I's balance sheet.
"I really like what these guys are doing. They're moving in the right direction," Mr. Bove said. But "if Metavante continues to make acquisitions adding goodwill [to its balance sheet] on these concept companies, they're pushing down the tangible book value" of M&I. "That could be a problem at some point."
In 2000, M&I announced plans to spin off Metavante through an initial public offering. The plan was shelved within three months as the tech stock market tumbled. Most recently, executives have said they consider the unit integral to M&I's future.
But Mr. Bove argued that Metavante would be worth more if separated from the banking business, which carries a lower earnings multiple.
"The success of Metavante is forcing the prospect of a spinoff at some point in the future," he said.
