Fiserv Inc. (NYSE: FISV) -- an operator of bank ATM machines -- bought CheckFree Corp. (NASDAQ: CKFR) today, according to Bloomberg News. Why did this happen and who could be next?
Fiserv's $4.4 billion acquisition represents a big bet on the growth in the Internet banking industry. And Internet banking is a growing business for the simple reason that it's cheaper and quicker to do banking over the Web than to build and operate a network of branches. Earlier in the year, Fiserv was outbid by Fidelity National Information Services Inc. (NYSE: FIS) when Fiserv tried to buy rival EFunds Corp. for $1.5 billion.
The combination will allow the company to eliminate about $100 million a year in expenses. The sale, which the companies expect to close by the end of the year, will add more than $125 million to revenue. Fiserv expects the purchase to add to earnings per share in 2008
This market is growing -- electronic payment transactions exceeded check payments for the first time in 2003, according to a 2004 Federal Reserve survey of depository financial institutions -- and today's announcement could spur further deals.
Here are four possible targets:
- Marshall & Ilsley Corp. (NYSE: MI)
- BottomLine Technologies (NASDAQ: EPAY)
- S1 Corp (NASDAQ: SONE)
- FundTech Ltd. (NASDAQ: FNDT)
It may be worth examining a possible bet on some or all of these.
Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the stocks mentioned.
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