Jack Henry to acquire Symitar Systems

MONNETT, Mo. and SAN DIEGO - Just when it seemed like consolidation in the data processing industry might be slowing, another mega deal is announced. Banking data processor Jack Henry & Associates, Monnett, Mo., has signed an agreement to acquire credit union data processor Symitar Systems, San Diego. Jack Henry will pay $44 million in cash for Symitar. Jack Henry serves approximately 2,650 community banks. The company has about 90 credit union clients, most of which it inherited from the 1998 acquisition of credit union/community bank data processor Peerless Group, Richardson, Texas. Over the last few years rumors have surfaced that Symitar had become a hot acquisition target for big processors. Symitar's customer service is well-known in the industry and its leaders are quick to point that Symitar has lost only one credit union client in 16 years as proof of their service levels. But during rapid consolidation in the credit union data processing industry in the late `90s, which saw credit union data processors USERS, XP Systems, CUSA Technologies, AFTECH, ULTRADATA and others be involved in mergers, Symitar stayed out of the merger mix. So why now? Why Jack Henry? According to Symitar President/CEO Bruce Cormode the three Symitar co-founders-Manny Prupes, John Landis and David Held-began discussing merger options in 1999. "Manny, John and David made the decision last year that in order to continue to be successful in this environment we needed to find a partner that shared our vision of customer service and technology. Obviously in today's market there are very large corporations that compete on price. By bringing in Jack Henry we gain great infrastructure and the resources we need so we can compete with them," said Cormode. "As a privately held company you have to always be thinking about how you are going to continue to meet the needs of your clients," said Cormode. One way to do that is to go public, another is to play the venture capital game, but Cormode said joining an established public company like Jack Henry was the best option. Cormode said a number of large processors came calling on Symitar. "It's no secret. There were a lot of players out there who wanted Symitar. We were one of the last holdouts. But Jack Henry was the right fit. It's amazing how much we see them as a mirror image of us," said Cormode. Symitar has always believed in controlled growth of its core product, said Cormode, something he said Jack Henry practiced with its core processing solution. Cormode also pointed to Jack Henry's software/hardware install process as another similarity. "They did the exact same things we did. They sold clients their systems and also the hardware; had staff install it and do the client support and training. You look at Jack Henry five years ago and it looked like us," said Cormode. As for its CU clients, Cormode said they aren't likely to see many changes post-merger. "Obviously my number one goal is to touch base with as many of the CEOs as I can to relay the message that we're going to continue our service. Everything will be in our actions," said Cormode. Symitar will keep its name, staff, management structure, and headquarters. It will be a wholly-owned subsidiary of Jack Henry that will operate as a Jack Henry division. There's one major change that may come of this deal. Symitar has always only offered an in-house solution, but with the resources of Jack Henry it may be able to go the service bureau route, said Cormode. Jack Henry has 15 data centers throughout the country that could help Symitar get its service bureau operation off the ground. Other Jack Henry products, like hot site recovery, could be offered to Symitar clients. Jack Henry also unveiled a portal product last year. Portals have become a more popular Web-based product in the CU industry. Both companies have successful Internet banking products. Cormode said about 110 of its CU clients will be running Symitar's own Net banking product by the end of this year. That's a high percentage for a data processor, said Cormode. Many CUs have chosen to go with one of the many third-party Net banking solution providers in the market. For Jack Henry, this deal gives the company a greater presence in the credit union arena. Symitar has approximately 240 credit union clients, with the average client in the $150 to $200 million asset range. Add those clients to Peerless' 90, and the company has over 300 CU clients. "We've been in the banking industry since 1976. The industry has continued to shrink due to consolidation. Our marketshare has grown, but our investors always want to know where we will grow in the financial services market. We acquired Peerless in 1998 and spent the last year and a half evaluating it (the credit union market). We understand to grow here you need marketshare. Symitar has the products and the name," said Kevin Williams, corporate controller for Jack Henry. Williams said Jack Henry will most likely take a "hands-off" approach to the acquisition. He gave the example of Jack Henry's 1994 acquisition of ATM switching firm Comlink. They've kept the same name and are operating pretty close to how they were when Jack Henry acquired them, said Williams. Jack Henry is very interested in the credit union market, according to Williams. "We want to become to the credit union world what we already are to the banking world," said Williams. He said Jack Henry has 30% of the nation's banks as customers, and is the largest provider of in-house solutions. One obvious difference between banks and credit unions is transaction volume, said Williams. "They run by different rules and regulations, and credit unions don't have near the amount of volume as a commercial bank. Software can react faster, and you don't need the bigger hardware," he said. Cormode noted that the wife of the late Manny Prupes, former Symitar CEO and one of the company's co-founders, was on hand the night the deal was finalized. "She said Manny would have been proud," said Cormode. Prupes died earlier this year at the age of 53. -pgentile@cutimes.com