Fiserv's Acquisition of First Data Corporation
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Case Code: BSTR584 Case Length: 15 Pages Period: 2008-2018 Pub Date: 2019 Teaching Note: Available |
Price: Rs.400 Organization: Fiserv, Inc. Industry: Payments industry Countries: United States Themes: Mergers and Acquisitions, FinTech |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
A Note on Fiserv
Fiserv, a Fortune 500 global financial services technology provider, came into existence when two companies ¬in the US – First Data Processing based in Wisconsin and Sunshine State Systems, Inc. based in Florida – merged in 1984 in Delaware, US. Fiserv became a public listed company in 1986 when it was listed on the NASDAQ stock exchange under the ticker name FISV. Fiserv had more than 25 million active bill payment users, more than 29 million card accounts, more than 85 million online banking users, and more than 28 million mobile banking users and had delivered more than 370 million eBills by the end of December 2017...
A Note on First Data Corporation
In 2018, FDC was one of the leading technology providers to the financial services industry. The company was a leading merchant acquirer and issuer processor in the world. It offered a wide range of solutions to its clients including commerce technologies, merchant acquiring, and issuing and network solutions...
The Deal
Under the merger agreement, in an all-stock consideration, the shareholders of FDC received 0.303 shares of Fiserv for every one share of FDC. As per the conversion ratio, the implied value of FDC was US$22.74 per share and the total deal value was US$22 billion. This was equal to a 29% premium based on a five-day volume weighted average price as of January 15, 2019. However, analysts pointed out that the per-share price of FDC – US$17.54 on January 15, 2019, was quite low compared to US$26.24 per share price on September 14, 2018. , They felt that the deal price was in favor of Fiserv as the high debt had reduced the negotiation capability of FDC...
Challenges Ahead
Jordan McKee, Research Director for retail payments at 451 Research, said, "Beyond the integration challenge that uniting these two industry giants will present, the deal comes at a time when merchant and bank clients are pressing First Data and Fiserv to become more agile and innovative to help them keep pace with new market entrants. This deal could be a major distraction that delays execution on these existing customer demands."...
Exhibits
Exhibit I: Payments Industry Ecosystem
Exhibit II: Leading Payments Organizations rival Banks in Market Capitalization in September 2017
Exhibit III: Selected Financial Data of Fiserv
Exhibit IV: Selected Financial Information of FDC
Exhibit V: Geography-wise Revenue of FDC (2018)
Exhibit VI: Global Business Solutions – Revenue by Geography (2018)
Exhibit VII: Global Financial Solutions - Revenue by Geography (2018)
Exhibit VIII: Share Price Movement of FDC from January 1, 2018, to May 31, 2019
Exhibit IX: Combined Entity Share of Revenue by Geography and Capability
Exhibit X: Annual Run-Rate Cost Savings*
Exhibit XI: Annual Run-Rate Revenue Synergies*
Exhibit XII: Financial Profile of Combination (Twelve months ended September 30, 2018)
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