Metavante Corp. raised its profile in electronic bill payment and presentment by unveiling a deal to buy Derivion Corp., a provider of electronic billing software to corporations.
The deal, announced Tuesday, is expected to close this month and furthers the Marshall & Ilsley Corp. unit's initiative begun in 2000 to focus on emerging growth opportunities, even though that strategy appears to be straining its cash flow. Last month Metavante announced that it planned to eliminate 400 jobs, 10% of its work force. The price of the Metavante-Derivion deal was not disclosed.
Brian M. Harvey, an analyst with Fox-Pitt, Kelton in New York, said Metavante wants "to grow their e-finance, electronic bill payment and presentment, and online consumer and commercial businesses, which tend to be higher-growth businesses for them."
Separately, Milwaukee-based Marshall & Ilsley announced Tuesday that it has agreed to buy $1.2 billion-asset National City Bancorp of Minnesota for $250 million (see article starting on page 1).
Derivion, a three-year-old company based in Atlanta, has operations in Toronto and London. Acquiring it would give Metavante, a provider of electronic bill payment services, a foothold in presentment; Derivion presents bills online for more than 85 billers, 42 of which are live.
Though Derivion's customer base is considerable, "the technology itself attracted us," said Nancy Langer, president and general manager of electronic presentment and payment at Metavante. "The full gamut of presentment technologies and customer bases is covered, so it puts us in a strong position as it relates to billers and financial service companies."
Metavante, of Brown Deer, Wis., has only two billers live with presentment but has relationships with three organizations that encompass several hundred billers each.
A higher volume of bills processed through Metavante would benefit Spectrum, the bank-owned electronic bill payment and presentment consortium, which in August 2000 hired Metavante to provide electronic bill payment services to Spectrum banks for five years. That arrangement is expected to begin in the fourth quarter, Ms. Langer said.
Spectrum also has agreed to market other Metavante electronic payment services to its bank participants' corporate customers, an effort that is slated to begin in the next 100 days.
Greg Rable, Derivion's chief executive officer, said in an interview Tuesday: "We decided that we needed a very strong strategic partner that could offer a complementary scenario. The capital markets are always something you have to consider when making a decision like this, but the big reason why we did this was purely strategic. We wanted to partner with the best company to take Derivion to the next level."
Jason Goldberg, an analyst with Lehman Brothers, said the EBPP market is getting primed for consolidation now that the capital markets have dried up. "We are seeing [consolidation] with a lot of small companies that launched in 1997 and 1998, when it was easy to raise money," he said. "Given the change in that situation, we see a lot of them struggling, because they don't have the cash to grow."
Also on Tuesday, Group 1 Software of Lanham, Md., announced a deal to buy TriSense Software Ltd. of Minneapolis, a Derivion competitor.
