Jack Henry & Associates Inc. said it has signed a letter of intent to take over Broadway & Seymour Inc. core banking software for community banks.
Broadway & Seymour got its start in this business. It will remain a provider of peripheral software systems for banks.
Officials from the two companies described the pending deal, valued at $12 million, as a merger between two technology houses rather than an acquisition, since they will continue working with each other through distribution and marketing agreements.
Jack Henry, a company with $43 million in annual sales, gains about 340 bank customers of the Liberty banking system.
The deal, which is expected to be completed by June 30, will add approximately 150 employees to Monett, Mo.-based Jack Henry.
Jack Henry will take over Broadway & Seymour's support contracts and license agreements for the Liberty automated banking system.
Bill Neal, chairman and chief executive officer of Charlotte, N.C.-based Broadway & Seymour, a company with $132 million in sales last year, compared the Jack Henry deal to Fiserv Inc.'s recent acquisition of Information Technology Inc., and Bisys Group Inc.'s bid to buy Document Solutions Inc.
He said it was yet another example of vendors consolidating to meet the needs of their bank customers, adding that the deal will allow each company to focus on the areas it does best.
"I think we have created a world-class partnership," Mr. Neal said. "Jack Henry will spend their money developing the core systems; we will spend our money developing the peripheral systems."
Peripheral systems are applications that are not part of a bank's "core" accounting systems for checking, savings, loans, and time deposits. Peripheral refers to ancillary systems, such as cash management or check imaging software, among others.
Mike Henry, chairman and chief executive of Jack Henry & Associates, said his company will help Broadway & Seymour sell its products to former customers as well as to Jack Henry's client base of nearly 1,000 banks.
"The addition of Broadway & Seymour clients looks to be a perfect fit," Mr. Henry said. "Since we are both in the same business, (the deal) reduces redundancy as far as product development and strategy goes. There is a lot that can be saved by merging these two companies."
William Bradway, a technology analyst with Tower Group, a Wellesley, Mass.-based technology consulting firm, believes the deal will give Broadway & Seymour "the ability to address a much larger customer base." From Jack Henry's perspective, it will be a "cost-effective alternative to develop complementary, auxiliary applications."
"It's more cost effective to let Broadway & Seymour do it than to have Jack Henry spend the necessary dollars on their own," Mr. Bradway said.