In buying Germany's Wincor Nixdorf, Diebold would not only be eliminating a rival — it would also gain new technology and retail relationships vital to its success in an economy that is growing much less reliant on plastic cards.
The $1.8 billion Wincor deal, which is still a non-binding agreement, would be the latest of many transformative moves the North Canton, Ohio-based ATM and bank technology vendor has made in the past decade to adapt to a rapidly changing market.
Diebold did not comment and Wincor did not return a request for comment. The acquisition is subject to due diligence, according to an announcement on Diebold's website. A combination of these companies would create the world's largest manufacturer of cash machines and ATMs, with nearly $6 billion in early sales.
The Diebold of 10 years ago was a troubled company, reeling from the very public failings of its voting machine business and facing a class action from shareholders and the beginnings of an SEC investigation of its financial reports that would eventually result in a $25 million fine. This was a shaky foundation upon which to enter the recession, a period of time in which many banks stopped building branches and buying ATMs.
Diebold's response back then was to broaden its focus to other bank technology services without moving too far away from its core competencies (a lesson learned from its elections business). It began winning contracts for ATM management and adding technology in anticipation of the boom in mobile and tablet-based banking.
"I want to be able to participate in that [mobile future], and help the company thrive as the world changes … making sure we aren't so blinded by something that we call an ATM that we miss the forest for the trees," said Thomas W. Swidarski, Diebold's CEO from 2005 through 2013, in a 2012 interview with Bank Technology News, a sister publication of PaymentsSource.
Diebold has continued on this path, acquiring and deploying technology that allows financial institutions to add more self-service and mobile capabilities to ATMs, which in turn allows banks to streamline branch operations.
But Diebold's journey is not yet complete, and it still has missing pieces that Wincor can address. For example, Diebold gets only 15% of its sales in Europe today, while Wincor gets nearly three quarters of its business in Europe. "They each have dominant market share in unique regions, Diebold in the U.S. and Wincor in Europe," Nicole Sturgill, principal executive advisor for CEB TowerGroup. "They've each ventured into the Latin America and Asia Pacific regions as well, so a merger would give them economies of scale to improve their offerings in those areas." Diebold has made deals with local banks to deploy ATMs in Ecuador and recently reorganized its efforts in Latin America. In Asia, Wincor Nixdorf is the No. 2 supplier of ATMs.
Diebold also needs to find a new audience for its products, particularly as banks close branches and customers manage their finances through a growing range of retailers and other providers.
"Wincor brings a strong retail presence to complement Diebold's strength in financial services," said Sturgill.
Wincor counts 17 of the world's largest 25 retailers among its clients, to whom it delivers more than a million point-of-sale units. The Paderborn, Germany-based company also offers a range of retailer technology including PC-based point-of-sale systems and cash recyclers. Earlier this month Wincor added NFC technology to its ATM hardware.
Diebold has been modernizing its offerings, deploying cardless ATMs at financial institutions such as Alma Bank in New York. Diebold additionally acquired technology to improve self-service capabilities and security for ATMs and payment kiosks.
"Promoting the cardless ATM transaction would be a good first opportunity," Sturgill said. "Both companies have strong engineering capabilities. Knowledge sharing between the two companies can result in unique features and functions added to retail and financial services offerings."
Diebold would acquire clients for cardless ATM products in Europe, where Wincor's activity has been mostly limited to a few pilots, said Richard Crone, a payments consultant.
The combination of the two companies would bring scale for ATM services that are at or beyond their maturity, such as remote deposit capture, as well as diversify Diebold's overall product set to help it compete against NCR.
"NCR are the ones to beat here; they have a complete set of assets across the payment chain," Crone said.
NCR has a broad point-of-sale infrastructure, payments gateway and substantial cardless cash access deployments, Crone said. It also has "a thousand ATMs running cashless access through its BMO Harris deployment," he said. NCR is fleshing out its Silver point-of-sale system with new products such as the Silver Register, a tablet-based device released in July.
"The 'omni-channel' experience and linkage between digital and physical channels are underway, as Western European bankers are looking at branch transformation projects and dealing with the fact that their ATM technology is obsolete," said David Albertazzi, a senior analyst at Aite Group. "Southern Europe and Eastern Europe have always been a challenge for Diebold, and Western Europe is in branch transformation. That is where an influx of new tech would help Diebold."