To at least some observers, it's hard to tell if Fiserv Inc. is a technology company or a hard-charging investment bank.

Since its founding in 1984 by George D. Dalton and Leslie M. Muma, the computer services company has purchased or otherwise acquired no less than 45 firms operating in more than 20 states.

This growth-by-acquisition strategy, which continued this month with Fiserv's agreement to purchase two Mellon Bank Corp. outsourcing businesses for $67 million, has transformed the company from a small regional provider of data processing into a diversified $322 million company that furnishes financial institutions with it a vast array of industry-specific technology software and computer services.

Fiserv's dealmaking has made it one of the top companies in the business of running computer systems for banks and thrifts, along with General Motors' Electronic Data Systems Corp., Marshall & Ilsley's M&I Data Sevices Inc., and Alltel's Systematics Financial Services Inc.

Doubts Allayed

Some bank technology insiders have been doubtful that Brookfield, Wis.-based Fiserv could absorb companies as quickly as it has acquired them.

But according to customers and Wall Street analysts, Fiserv has succeeded.

"The company has done brilliantly in digesting the most recent of its acquisitions," said Stephen T. McLellan, a first vice president in Merrill Lynch & Co.'s San Francisco office. "The biggest challenge it has now is in holding the hands of its acquired clients to make sure they don't leave during the transition."

The basis for Fiserv's success appears straightforward. In sizing up possible acquisitions, Fiserv executives closely examine how the target company's products and services can complement their existing businesses.

But Mr. Dalton, Fiserv's chairman and chief executive, said that as important as products and services are, the leadership in place at an acquisition target figures perhaps most prominently in his decision to move towards buying the company.

"If we don't want the management, we don't buy the company. It's as simple as that," Mr. Dalton said.

From all outward appearances, this strategy is paying off. Fiserv has grown from $21 million in revenues in 1984 to $332 million at year end 1992. Net income has risen steadily, more than doubling since 1988 to $22.9 million. In addition, earnings have risen from 50 cents a share in 1988 to $1 at yearend.

Making the Good Better

Analysts say the heavy emphasis Fiserv places on finding companies with quality management has a lot to do with how it has brought so many disparate pieces together successfully.

When Fiserv buys a business, the analysts said, it does so with the intention of trying to improve upon what is good in the business rather than trying to revamp the companies according to some overriding plan from the mother company.

This approach has several advantages. First, and perhaps foremost, it typically avoids putting the customers of acquired companies though conversions to new software or hardware.

Conversions can be notoriously messy, and bankers go to extremes to avoid them. Since the vast majority of Fiserv's customer growth has come from its acquisitions, keeping post-acquisition customers happy and in place has been a crucial part of Fiserv's success.

Avoiding Conversion

"We were very pleased to know that we would not have to go through a conversion," said Scott Smith, president and chief operating officer of the $1.5 billion asset Fulton Bank in Lancaster, Pa. Fulton Bank was a data processing customer of Mellon Bank Corp. until Fiserv bought the Mellon units earlier this month. "Our customers have already experienced a conversion from some of our own merging, and it's something we wanted to avoid putting them through again," Mr. Smith said.

The second advantage to Fiserv's acquisition is that it brings with a vast array of products, ranging from traditional outsourcing services, core accounting software that banks can run themselves, electronic funds transfer products, and check processing services.

Wall Street analysts say it is this diversification strategy that will be most important to Fiserv for attracting the new business essential to the company's continued growth.

"Investors like to see internal growth on top of the business added through new acquisitions," said Patrick Burton, a transactions services analyst at Piper Jaffrey Inc. based in Minneapolis. That [Fiserv's] growth to date has been mostly due to acquisitions may be the only knock against the company from an investor's perspective."

Thumbs-Up from Market

Mr. Burton noted that Fiserv's stock has done well following its most significant recent purchases of the data processing units of Mellon Bank Corp. and the Basis Information Technologies Inc. unit of First Financial Management Corp.

Both of these companies ranked among the 10 largest bank data processing companies in the U.S., according to M. Arthur Gillis, an independent consultant based in New Orleans.

Despite all the financial computer activities in which it engages, Fiserv's core business clearly remains data processing services, which it provides mainly to smaller institutions.

In terms of sheer numbers of customers, Fiserv is the second-largest provider after, Electronic Data Systems, of data processing services for both commercial banks and thrifts with asset under $500 million, according to Mentis Corp., based in Eden, Md.

Steady at the Helm

At first blush, a large customer base combined with a wide variety of computer services and hardware platforms would appear to be a management nightmare.

The reason this is not the case, Fiserv's George Dalton says, is because of the company's belief in retaining the managers of its acquired companies.

After more than 40 acquisitions, including those of the technology units of Citicorp and Mellon Bank Corp., Fiserv has lost only three top officers from its acquired companies. "One retired, one died, and one just didn't work out," Mr. Dalton explained.

By retaining officers who already know their business, Fiserv frees itself from direct management over the acquired companies. The managers of each of these Fiserv units are accountable for their profits and losses, which drives the units to maximum efficiency.

Citicorp Orphan

At the same time, the strategy has its perks for the acquired companies.

As part of larger organizations, many of the companies that Fiserv has bought did not historically have access to the funding for technical upgrades and other purchases that are such an integral part the data processing business.

Citicorp Information Resources, which Fiserv acquired in February 1991, was in such a situation. CIR gathered more than $100 million each year in revenue but was just a tiny part of Citicorp, which boasted more than $200 billion of assets.

"We were clearly not important to [the parent company] at all - we didn't even make it into the annual report," said Frank Martiri, president of the Fiserv division dealing with IBM hardware and the former head of Citi information Resources.

Enhanced Responsiveness.

The upshot of this lack of recognition, Mr. Martiri said, was that the CIR unit - which specializes now as before in computer products and services for International Business Machines' AS/400 midrange computer - could not get funding for technical upgrades that were necessary to allow it to compete.

"The worst thing that you can say to a client is ~You have to wait while I go to corporate for an answer,'" said Mr. Martiri. "That's not something we have to do anymore."

As Mr. Martiri indicated, data processing customers do not want to wait for enhancements to their services. And from all indications, they have not had to do so - a fact which analysts feel bodes well for Fiserv's future.

Bank of North Texas, a $375 million-asset institution based in Fort Worth, has been a customer since October.

Fiserv "seems to be working hard to continue to modify the system that we're on, to meet our needs," said Vikki L. Pier, the bank's chief financial officer.

"We have put in some requests, for enhancements that are being addressed as a priority," she said. Fiserv is "receptive to suggestions - which is all I can ask for."Shopping Spree Some of Fiserv's acquisitions,in millions Aug. 1993Mellon BankCorp. units $67Feb. 1993Basis InformationTechnologies Inc. 97Feb. 1991Citicorp InformationResources 70 Sources: Fiserv Inc. and industry estimates!!!END TABLE

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