The merger of Bantek West Inc. and Efmark Premium Armored could spur further consolidation among automated teller machine servicers as small vendors try to compete more effectively with the major ATM manufacturers.
Bantek, of Denver, and Efmark, of Westmont, Ill., announced the merger last week. They said it created the nation’s largest independent ATM servicing company, serving more than 2,000 customers with more than 65,000 ATMs.
Diebold Inc. of North Canton, Ohio, and NCR Corp. of Dayton, Ohio, the top ATM manufacturers, have long dominated ATM servicing as well. Many of the independent servicers, in contrast, are small and tend to operate only in their own regions.
Bantek’s president, Leif Houkom, said the merged company has a national reach and will be able to stand toe to toe with Diebold and NCR.
“Individually we both had holes in our service areas,” Mr. Houkom said. “When you combine the two entities, our strengths and our weaknesses complement each other very nicely, such that the combined entity ends up with a nice national footprint.”
The private companies are calling it a merger of equals and would not discuss financial terms. A Chicago private equity firm, Edgewater Funds, which had a minority stake in Bantek, will also have a minority stake in the new company.
The combined company has yet to be named, though executives said one would be announced in the first half of the year. Until then Bantek and Efmark will use their current names.
Leon Majors, the president of ESP Consulting Group in Salisbury, Md., said ATM manufacturers have about 60% of the market for ATM servicing. Efmark has about 16% and Bantek about 2%.
Tecniflex Inc. of Nashville, which bought BancSource of Henderson, Ky., in October, has a roughly 9% share, Mr. Majors said. “Then we have 68 other providers with less than 1% of the market,” he said.
The Bantek-Efmark deal could prompt other third-party ATM maintenance companies to merge, Mr. Majors said, “because now you have another company with scale. That is going to make it harder and harder for companies that don’t have scale to compete.”
Edward Neumann, the managing director of the banking practice for CC Pace, a financial services consulting firm in Fairfax, Va., said, “Banks are merging, and it’s important that servicers become large national providers so they can handle the needs of large ATM deployers.” Large banks have thousands of ATMs scattered over numerous states, and it takes a large servicing company to handle an ATM network of that size.
Large banks “want to know their vendors are not fly-by-night” operations Mr. Neumann said. “They want to know that their vendors aren’t going to disappear overnight.”
ATM servicers typically handle tasks such as replenishing paper when machines run out of receipts, filling the machines with cash, and fixing paper jams and other minor problems. Many also take on more difficult repairs when an ATM malfunctions and a mechanic has to open the machine to investigate and correct any problems.
Efmark has a larger maintenance business, while Bantek is stronger in cash delivery. ATM manufacturers do not typically offer cash delivery services.
Mark Hoppe, Efmark’s president and chief executive, said his company has had an armored car service for five years, but its only cash service is delivery to ATMs.
“More and more, we had customers asking us to provide coin and currency services for branch tellers,” Mr. Hoppe said. “Now, with the merger, we’re going to gain the knowledge that Bantek has in providing that service.”
The merger also fills in some geographic gaps, Mr. Hoppe said. “We were not able to service our customers in the New Mexico market,” he said. “Bantek has a presence in the New Mexico market, so Efmark’s customers will be able to be serviced in that state now.”
He said that Bantek’s clients include Bank of America Corp., Wells Fargo & Co., and Washington Mutual Inc.; Efmark’s include JPMorgan Chase and Co. and PNC Financial Services Group Inc.
John Vrabec, the executive director of the Financial and Security Products Association in Albuquerque, whose ATM servicer members include Bantek Efmark, Tecniflex, and BancSource, said it was too soon to call those two deals a consolidation trend.
“Most of our members are smaller and regional, and don’t go after the big-bank markets,” Mr. Vrabec said. “I don’t know if they’d even be that attractive” a target for a larger servicer, “and a lot of these companies are fiercely independent. I don’t see it as a trend yet.”
Diebold spokesman Mike Jacobsen said that “at least initially” the merger will not affect “how we go about servicing our customers and being active in” ATM servicing.
