With an agreement to acquire Harland Financial Services for $1.2billion, Toronto-based financial technology company Davis +Henderson, aka D + H, has transformed itself into a player in theUnited States' financial services scene.

The deal is expected to close in three to four weeks, said D + HUSA president Bill Neville.

D + H serves some 1,700 banks and credit unions across NorthAmerica. With its business hub in Canada, however, it hascomparatively less recognition in the United States.

Harland has around 5,400 credit union and bank clients in theUnited States. Its UltraData and Phoenix core systems power some385 credit unions, according to Callahan & Associates, withmost on UltraData (381) and a few others on Phoenix.

Neville, in an interview about the acquisition, said D + Hproceeded with the deal in order to grow quickly in the UnitedStates financial technology market.

Neville added, “We will invest in UltraData and Phoenix. Bothare strong, both are impressive.”

After the deal closes, D + H revenues will be roughly the samesize as Jack Henry, whose Symitar group sells cores to creditunions, said Brad Smith, CEO of Austin, Texas-based consulting firmAbound Resources.

By D + H's count, after the deal closes and accounting forshared relationships, it will serve 6,200 financialinstitutions.

“D + H is a strong company in lending technology. They have anintegrated commercial–consumer mortgage loan origination systemthat is much higher tech than Harland's Credit Quest and DecisionPro,” Smith said.

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Cornerstone Advisors partner Steve Williams said in an interviewthat the deal was ambitious on D + H's part, but, he added, that D+ H saw the value of entering the U.S. market.

Another partner at Scottsdale, Ariz.-based Cornerstone Advisors,Terence Roche, stressed that Harland brings many revenue sourcesto D + H, that the deal is not simply about lending products orcore systems. But that in fact Harland comes with a range ofproducts and services that will likely help D + H establish itselfquickly in the US market, said Roche.

“Core is important,” said Roche, “but what this will be about isintegrating a range of products with the core and offering smoothdelivery.”

He added that a key to making the acquisition work for D + H isits ability to win credibility for the Phoenix core among creditunions. “Harland had been moving too slowly on that,” he said. Heelaborated that as credit unions grow they outgrow cores such asUltraData and so a success key becomes migrating existing customersover to the more robust core. Harland had been attempting to sellalong those lines but, suggested Roche, more successes are neededand D + H will have to move faster.

He added that, in his mind, the opportunity is there for D+H.

Most credit unions, he elaborated, are hungry for an option thatis not Fiserv or Jack Henry and this gives D + H a chance toprosper. “D + H has to inject credibility into Phoenix. They haveto try harder, to be Avis.”

“There is an opportunity for a disruptor,” he said.

As for the question, did Harland need to sell, in the spiritthat, according to most experts, Open Solutions needed to sell whenit was acquired by Fiserv in January, the Cornerstone Advisors experts wereunited in indicating that there were not similar pressures in thiscase.

Roche also indicated that there probably were limited potentialbuyers for Harland. “Fiserv, Jack Henry and FIS would not have beeninterested,” he said.

A question raised by some observers revolves around D + H'sability to finance the acquisition. It does not have the $1.2billion on its balance sheet, so it is going to capital markets toraise funding.

Abound Resources' Smith says this reminds him of Open Solution,which found itself in an increasingly cash poor vein that, saidobservers, limited its ability to develop and service itscores.

Added Smith, “ if they're tight on cash, I don't see how they'regoing to fund” the upgrades that will be needed in Phoenix.

Cornerstone Advisors' Williams pointed to the solid revenue baseD + H is acquiring in Harland. He indicated there were good reasonsto believe D + H will be able to create the profitable beachhead ithopes to have in the U.S.