Goldleaf Financial Solutions Inc. of Brentwood, Tenn., which has focused mainly on small banks, expects its purchase of the Alpharetta, Ga., imaging technology vendor Alogent Corp. to help it compete more effectively by allowing it to serve big banks, too.
Goldleaf announced Thursday that it had bought Alogent for $42.5 million in cash, stock, and convertible debt.
Analysts said that Goldleaf, best known as a provider of automated clearing house services for small banks, became a significantly larger competitor with the addition of Alogent, which sells its imaging software mainly to large banks, and gained new opportunities in a consolidating payment market.
Lynn Boggs, Goldleaf's president and chief executive, said the purchase allows his company to remain competitive against large rivals.
"I can go into just about any bank in the country and we're able to do just about anything they want on the payment side," Mr. Boggs said in an interview Thursday after the deal closed. "We're going to continue to grow the business and go head-to-head against the guys who are really big."
Goldleaf said Alogent will increase its sales by more than half, projecting revenue of approximately $87 million for this year. Goldleaf had $56.1 million of revenue in the four quarters that ended Sept. 30. (It has not set a date to report fourth-quarter and full-year results.)
Analysts said the purchase made Goldleaf a more viable competitor in financial technology.
John Kraft, a stock analyst at D.A. Davidson & Co., said that Goldleaf had made a couple of small acquisitions last year but did not seem to have a lot of credibility with investors.
"These guys have really been struggling. Then they make this monster acquisition," said Mr. Kraft, who rates the stock a "buy."
He contrasted the Alogent purchase to Fiserv Inc.'s much larger one last month of CheckFree Corp., which also sells a suite of ACH software products to large banks. "They're competing against the Fiservs of the world, which have the ability to offer it on a licensed basis or a hosted basis or any basis you want."
Bob Meara, a senior analyst at the Boston research and consulting firm Celent LLC, also mentioned CheckFree, but in the context of its April acquisition of Carreker Corp., a Dallas vendor of big-bank check software.
That purchase brought together a group of payments experts with "fairly comprehensive knowledge of both payment systems," said Mr. Meara, who once worked at Alogent. He also compared the purchase to the September purchase of Vicor Inc., a Richmond, Calif., vendor of lockbox software, by Metavante Technologies Inc.
"Maybe this is evidence that the convergence of payments is more than a catchphrase," Mr. Meara said.
Brian Geisel, Alogent's founder and CEO, said the fact that his company had little customer overlap with Goldleaf was an advantage in making this deal.
"It was all about payments, all about remote deposit, all about bringing a little more scale to the market," Mr. Geisel said. "We're both payment businesses. We just deploy them in different ways."
Alogent, a pure-play imaging provider since it was founded in 1995, primarily serves large domestic and foreign banking companies, including JPMorgan Chase & Co., KeyCorp, and Barclays PLC.
Goldleaf, by contrast, provides automated clearing house and remote-deposit systems, along with other products and services, to 2,500 small financial institutions. It took its current form through a series of acquisitions in the last three years by Mr. Boggs after he left InterCept Inc., an Atlanta check processing outsourcer that Fidelity National Information Services Inc. acquired.
"We start at the top," Mr. Geisel said. "They start at the bottom, and we meet somewhere in the middle."
As a stand-alone specialist in imaging, Alogent was constrained by a lack of resources, he said. "As a relatively small company, Alogent had to make decisions to put money into this and not that."
Check imaging still has a strong future, as image capture moves increasingly to customers' desktops and the branch, with real-time processing by the banks, Mr. Geisel said. "With Goldleaf, we have the scale to take the next step."
Goldleaf paid Alogent's investors $32.9 million in cash (funded by an expanded line of credit), a $7 million convertible note at $4.50 a share, and $2.6 million in its common stock.
Mr. Boggs said Goldleaf's lenders — Bank of America Corp., Wachovia Corp., and People's Bank of Winder, a unit of People's Holding Co. of Winder, Ga. — did not hesitate to provide the expanded line of credit, despite the difficult conditions in the credit markets today.
Goldleaf also can invest in Alogent or make additional deals, he said. "We still have plenty of cash on hand today. We still have plenty of capacity und er the line."
Christine Barry, a research director at the Boston research and advisory firm Aite Group LLC, said the combination of ACH and imaging expertise, as well as the big-bank and small-bank sales forces, will improve Goldleaf's competitive position.
"By being in a limited number of product areas, it's getting harder and harder for vendors to survive," she said.
Mr. Boggs said Goldleaf would continue to move quickly when it sees opportunities to do things like integrating offerings. "We're not big. We're still nimble."
