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Now that it has sold its small core processing and teller automation business to another technology vendor, Goldleaf Financial Solutions Inc. plans to step up marketing of its integrated payment processing systems to middle-market banks.
January 7 -
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.
January 18 -
Jack Henry & Associates Inc. has created a division to house the 13 companies it has acquired in the past 18 months.
February 24 -
With three acquisitions in the past two months, Private Business Inc. is refocusing itself as a technology provider to community banks.
February 2
Doing just one thing well is no longer good enough for payments processors serving community banks.
That was the thinking behind Jack Henry & Associates Inc.'s deal to buy Goldleaf Financial Solutions Inc.
The deal, announced Monday, could open up new markets for Jack Henry, which more than other big core vendors has historically sold its ancillary products only to its core banking customers.
Goldleaf brings to Jack Henry some relatively unusual business lines, such as its LendingNetwork, which offers receivables financing for business-to-business suppliers and other financing functions not normally associated with a technology vendor, said Nancy Atkinson, a senior analyst at the research and advisory firm Aite Group LLC of Boston. "They're going beyond just doing processing for banks but also doing financing for corporates that need to manage their receivables."
Jack F. Prim, the Monett, Mo., vendor's chief executive officer, cited the smaller company's eponymous automated clearing house software and its technology for the remote deposit of checks via image.
Though both vendors primarily serve the community bank market, "for the longest time, we didn't compete with them that much," Prim said Monday, after Jack Henry announced the deal. But "we've found ourselves competing with them much more in recent years, because of remote deposit capture." Goldleaf, of Norcross, Ga., bought the Alpharetta, Ga., imaging technology vendor Alogent Corp. in January 2008.
Jack Henry, the 18th-largest company in American Banker's FinTech 100 last November, said it would pay $18.9 million in cash for Goldleaf's outstanding stock and would retire $42 million of assumed Goldleaf debt.
At 98 cents per share, Jack Henry is paying a premium of 40% over Goldleaf's Friday closing price of 70 cents. Goldleaf ranked 87th on the FinTech list.
Jack Henry says it has 8,800 customers nationwide, and Goldleaf has 3,500. Prim said he did not know how much overlap there is in the two customer bases.
The deal came together quickly, after only 45 to 60 days of talks, Prim said, and the companies' goal is to close the deal by the end of September.
The transaction is small next to the year's other pending core-vendor merger: Fidelity National Information Services Inc.'s deal to buy Metavante Technologies Inc. for $2.94 billion. That deal is expected to close in the fourth quarter.
But Prim said that Jack Henry continues to be interested in buying more.
"We've said for quite a while, the best use of our cash is to do acquisitions," Prim said, pointing especially to niche vendors of specialized banking products and services.
"We're solidly profitable and will remain so, even if the economy remains as bad in the next 12 months as it has been in the last 12 months," Prim said, adding that the economy does appear to be stabilizing. Jack Henry is scheduled to report earnings today for its fiscal fourth quarter.
Analysts said the addition of Goldleaf's technology and customer base should be good for Jack Henry as it competes for core processing business against larger rivals, Fidelity and Fiserv Inc. of Brookfield, Wis.
"Especially in the community bank market, there is no small willingness for them to put all their eggs in one basket, especially if the vendor does a good job," said Bob Meara, a senior analyst at Celent of Boston, the financial research arm of Marsh & McLennan Cos. Inc.'s Oliver Wyman consulting unit.
"I think small banks take comfort in the safety and soundness of the large publicly traded companies," Meara said, and are uncomfortable with the uncertainty of dealing with smaller vendors that may not be as well capitalized.
Atkinson noted that in recent years Jack Henry has broadened its approach, and Goldleaf could extend that strategy. Jack Henry formed a new division, ProfitStars, in 2006 to serve as an umbrella brand for a dozen disparate technologies, with a goal of expanding its sales to large U.S. banks, foreign financial companies, and even companies in industries outside banking.
Atkinson compared the Goldleaf deal to that reorganization. "This acquisition, like ProfitStars before it, opens up new markets for Jack Henry," she said.
Lynn Boggs, the chief executive of a Brentwood, Tenn., company called Private Business Inc., bought the ACH and wire-processing technology vendor Goldleaf, also of Brentwood, in January 2006, and Private Business later took the Goldleaf name.
Goldleaf went on to make a series of acquisitions, capped by its purchase of Alogent.
Goldleaf has struggled in the past year. It has had three consecutive quarters of losses, which it attributed primarily to the impact of the credit crisis on the lending side of its business. Its stock has been trading below $1 since October.
Goldleaf would not provide executives to comment for this article. A spokeswoman said the company is in a quiet period.
Separately, Goldleaf reported Monday that it swung to a second-quarter net loss of $1.5 million, or 8 cents a share, from a profit of $322,000, or 2 cents a share, a year earlier. Revenue fell 21%, to $16.3 million.
Goldleaf saved $650,000 in the second quarter as a result of cost-cutting initiatives that got under way in the first quarter, Boggs said in a press release. "Overall, we believe our outstanding suite of products and services will be able to capitalize on increased financial institution spending as the economy begins to turn the corner."
