The Jaguar may go on the prowl again soon.
Though Fidelity National Financial Inc. said last fall that it would cut back on acquisitions, Frank R. Sanchez, the president of the product development division at Fidelity Information Services Inc., said the parent company has identified some holes in its coverage that could be patched up by buying other companies.
Investment bankers, he said, have nicknamed Fidelity National "Jaguar," a nod to the Jacksonville, Fla., company's hometown N.F.L. team and the way it goes after takeover targets.
"We're in the market, chasing them down, and gobbling them up," he said.
In an interview last week with editors of American Banker, Mr. Sanchez made it clear that it is just a matter of time before Fidelity National will try to "fill in some of the white spaces" between its bank technology businesses.
One key gap is in payments, and Mr. Sanchez also stressed overseas expansion opportunities.
Fidelity National has been moving into banking technology through acquisitions dating to its April 2003 purchase of Alltel Corp.'s core processing business.
Last November, after buying the Atlanta core processing outsourcer InterCept Inc., Fidelity National said it would hold off on further buyouts so that it could integrate companies it had already bought. Since then it has focused on restructuring moves. These included the sale in December of a 25% stake in Fidelity Information to a pair of private equity companies and this month's announcement that Fidelity would spin off 17.5% of its title insurance business.
Mr. Sanchez said the goal is to position Fidelity National as a holding company with two majority-owned subsidiaries, and to drive up both operations' stock prices.
He noted that this strategy recognizes that the market values technology companies at a higher earnings multiple than insurance companies, and that Fidelity National's share price is undervalued. Creating two different stocks would solve this problem.
With this corporate framework largely in place, Mr. Sanchez felt free to offer hints about his company's plans, including acquisitions.
Though Mr. Sanchez would not name any companies Fidelity might have its eye on, he noted that it has no payments businesses, and he suggested that buying a company with check imaging software is a possibility. There are not many good takeover candidates in that market, however.
One of his competitors is Metavante Corp., which bought two image-software specialists, Ad-vanced Financial Solutions Inc. and VectorSGI. A third image vendor, Wausau Financial Systems Inc., went through a private equity buyout in February that will probably keep Wausau in private hands for the next several years.
Mr. Sanchez also mentioned automated clearing house and electronic funds transfer services, though Fidelity National's competitors have a head start here as well. Metavante bought NYCE Corp. last July from First Data Corp., and Fiserv Inc. of Brookfield, Wis., bought a funds-transfer network in December 2002 from Electronic Data Systems Corp. of Plano, Tex.
Discussing prospects abroad, Mr. Sanchez said, "International is a green-field opportunity for us," notwithstanding the 29% stake his company acquired in June 2004 in Covansys Corp., a data processing outsourcer with strong operations in India.
In many overseas markets, "We have to buy our way into significance," Mr. Sanchez said. "Scale in itself is very beneficial" because it can provide "a barrier to entry for other vendors."
Mr. Sanchez also sought to allay customers worried that Fidelity National might abandon support for some of the core processing systems it has acquired. He said its three core software packages serve different markets - a batch-oriented system for mainframe use; a real-time system for Unix and Linux networks; and a real-time system for mainframes. It is doubtful that users of each of those systems will move, he said.
Robert Hunt, a senior analyst at MasterCard International's TowerGroup market research unit in Needham, Mass., discounted the notion that Fidelity would retire any of its core banking systems, which are in 28 of the nation's 100 largest financial institutions (more than any other vendor).
"Generally in core banking, you don't do it. Unless you have a very small customer base, it's a bad idea," Mr. Hunt said. "You don't want to hurt the core relationship by saying, 'We don't want to support that system.' It's like open season on your customer base."
