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Summary

FIS announced this week that it is acquiring SunGard, a major provider of financial technology software, particularly to the financial markets industry. FIS has grown through acquisition, and with a $9.1bn price tag, this deal is by far its largest. It marks an important diversification into the financial markets industry (adding to its current strengths in banking and payments) within the fintech sector.

SunGard acquisition gives FIS a strong position in the capital markets and treasury technology sectors

FIS is one of the top providers of software and services to the banking and payments industries. With 2014 revenues of $6.4bn, it is already the largest vendor servicing the sector (excluding broader enterprise players such as IBM and HP). However, with SunGard adding annual revenues of $2.8bn, the combined company will be the leading player by some distance. Notably, non-US revenues will increase from $1.4bn to around $2.5bn, which will significantly strengthen its position as the leading global provider, as well as the leading US provider.

However, the acquisition is less about achieving scale for FIS, and more about its diversification into an adjacent market. The company has historically been highly focused on servicing the banking and retail payment sectors. This first shifted in 2010 when its acquired Capco, a broader FS consulting house that had a significant focus on the financial markets industry. More recently it acquired Clear2Pay, which was a broader payments provider (i.e. wholesale and retail). However, its $9.1bn acquisition of SunGard is a clear indicator that it wishes to be a major provider to the financial markets sector as well.

Like FIS, SunGard is a fintech provider, but its position is by far strongest in capital markets, followed by the asset and wealth management sectors, and the treasury sector – all markets that are largely adjacent to FIS. SunGard does have a presence in retail banking, albeit outside the US market, but despite their respective sizes there is limited overlap between the two.

Although SunGard also has a synergistic business model mix (between license, SaaS, and services), the long-term challenge here will be product management. SunGard has an extensive product portfolio, adding to the significant portfolio already managed by FIS. The company will need to balance its next-generation platform strategy with differing client needs and innovation cycles across the FS sector.

Appendix

Author

Daniel Mayo, Chief Analyst, Financial Services Technology

daniel.mayo@ovum.com

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