Fidelity National Financial Inc. will announce today that it has bought Customized Database Systems Inc., a New York company specializing in loan-syndication software.
The deal closed Sunday. The Jacksonville vendor, which did not say how much it paid, intends to combine its loan-servicing software with Customized Database's marketing and loan-tracking packages, streamlining record keeping for loan syndications.
Fidelity National, the nation's largest title insurance company, has made several financial technology deals since it bought Alltel Information Services from Alltel Corp. in April.
Since that acquisition, which resulted in the formation of the Fidelity Information Services unit, Fidelity National has bought WebTone Technologies Inc., which makes systems for customer relationship management, branch automation, and call centers; Hamilton & Sullivan Ltd., a developer of online-banking, wire-transfer, cash-management, and account-analysis software; and the 34% stake that it did not already own in Fidelity National Information Solutions Inc., a provider of real estate and mortgage data and technology.
It has also continued to buy title insurance companies and other related firms.
Fidelity National officials said last week that they plan to run Customized Database as part of Fidelity Information's Advanced Commercial Banking Systems group. Fidelity National's flagship syndication products, SyndTrak and LoanTrak, will be integrated with Customized Database's loan-servicing software sometime next year.
Richard A. Levy, the president of commercial and wholesale banking at Fidelity Information, said the acquisition will begin to contribute to earnings next year.
The syndication market is complex and fragmented, composed of a handful of powerful agent banks that line up participants among other banks, mutual funds, hedge funds, and insurance companies. And "the logistics of settling transactions are truly archaic," said David E. Levy, the chief executive officer of the privately held Customized Database. (He is not related to Richard Levy of Fidelity National.)
A large lead bank, such as Bank of America, might process transactions on 100,000 loans a night, and it is not unusual for a $15 billion line of credit to involve 50 to 100 participating lenders. When the borrower draws on the loan or makes a payment, "the day-to-day transactions are done by fax and telephone," so the settlement can take 10 days, David Levy said.
The manual organization of the market produces 10 million to 15 million redundant transactions annually, as data are entered manually in each participant's accounting system, and 4 million to 6 million redundant cash settlements, according to officials from Fidelity National and Customized Database.
Integrating their products, the two companies say, will produce several enhancements. For instance, a borrower's payment will be entered once, in the agent bank's LoanTrak system, which will automatically update the agent's accounting system, allocate funds, and pay the participants.
Over the longer term, Fidelity National envisions "developing industrywide mechanisms that can allow the market to operate more efficiently, not just within institutions but between institutions," David Levy said.
