Open Solutions Inc., which sells core processing software to banks and credit unions, said Friday that it had bought a company that sells core processing software exclusively to credit unions.
The $20 million deal for re:Member Data Services Inc. of Indianapolis closed Thursday, according to Open Solutions, of Glastonbury, Conn.
The acquisition, Open Solutions’ third and largest since going public in November, is meant to broaden its reach into the credit union market and set the stage for international growth, said Gary Daniel, the senior vice president and general manager of Open Solutions’ credit union group. The deal makes Open Solutions the third-largest U.S. vendor of credit union processing software.
Last month Open Solutions bought EastPoint Technologies LLC, a Bedford, N.H., software vendor, for $7 million in cash. In February it bought Maxxar Corp., a Wixom, Mich., voice technology vendor, for $6.5 million in cash.
Mr. Daniel said that his company’s initial public offering, which raised $88 million, paid for the purchases, and that future acquisitions would probably involve a combination of cash and stock. “We are looking at some other opportunities.”
Before the acquisition, Open Solutions had 2,600 clients, 300 of which (including 80 credit unions) use its core processing system, Mr. Daniel said.
Buying re:Member gives Open Solutions 100 new clients and some new services to offer, such as credit card processing, he said. Though its long-term goals involve picking up foreign customers, “our primary market in the next several years will continue to be United States-based credit unions” and banks.
David Becker, the founder and former chief executive officer of re:Member, said it started out discussing a deal with Open Solutions that would integrate some of their products, but in the end, “it made more sense to put the companies together.”
Mr. Becker, who calls himself a “serial entrepreneur,” forfeited the CEO post when the deal closed, but he still runs some other companies, including First Internet Bank of Indiana, of which he is the chairman and CEO. The bank is a re:Member client.
Christine Barry, an analyst at Celent Communications LLC in Boston, said that most credit unions handle core processing in-house, but that their needs are growing as they pick up new customers in small business and other areas. Thus, she said, outsourcing vendors that cater to credit unions may find themselves in demand.
The needs of small financial institutions are growing, “and that’s probably why they are more attractive to vendors,” Ms. Barry said. “Open Solutions is taking the approach that other vendors are — that banks are looking to the vendors to meet many of their needs, not just one area.” The more services a vendor can offer, the more business it can generate from existing customers.
